Reserve Bank decides to keep repo rate at 6%

THE South African Reserve Bank (SARB) left interest rates unchanged as expected yesterday‚ citing a much better inflation outlook for this year and weak economic growth as some of the main reasons for its decision.

The bank revised its inflation forecast for this year lower to 4.7% from 5%‚ for next year to 6.2% from 6.1%‚ and for 2017 to 5.8% from 5.7%.

“The MPC [monetary policy committee] has decided unanimously to keep the repurchase rate unchanged, for now, at 6% per annum,” SARB governor Lesetja Kganyago said in Pretoria.

A weak rand remained the main concern‚ as it could drive inflation higher in future.

“Risks to the inflation outlook are on the upside‚” he said. The rand had depreciated by about 9% against the dollar since the last MPC meeting in July.

Although South Africa would suffer weak economic growth‚ a recession was unlikely‚ Kganyago said.

The bank’s MPC statement said economic contraction was unlikely in the third quarter following a 1.3% decline in the second quarter.

Consumer inflation slowed more than expected to 4.6% in August compared to a year ago from 5% in July, Statistics SA data showed yesterday.

An inflation rate of 4.7% yearon-year had been expected.

The deceleration was mainly thanks to lower fuel prices. The petrol price fell by 51c/litre last month.

The decline in fuel inflation was offset by a slight increase in food inflation.