The rand weakened to R14.73 to the dollar on Thursday afternoon, before stabilising to levels of R14.64 following the repo rate announcement.
The South African Reserve Bank (Sarb) on Thursday said that its monetary policy committee (MPC) had unanimously decided to keep the repurchase rate (repo rate) unchanged at 6.75 percent per year while economic growth forecast was revised down.
South Africa’s central bank last raised the repo rate by 25 basis points in November to stem inflation pressures.
Sarb governor Lesetja Kganyago said that the MPC was continuing to assess the stance of monetary policy to be accommodative.
Kganyago highlighted that increases in Eskom tariffs, fuel prices and exchange rates would create inflationary pressure in coming months, and cautioned that global growth had also been more sluggish than previously anticipated.
He also pointed to geopolitical risks, trade tensions and Brexit as key risk factors for global growth and cohesion.
The rand was continuing to tread water in the wake of the announcement, as emerging market weakness dominated the field. These risks all pointed to the downside for GDP. With this in mind, growth forecasts for 2019 were revised down.
Kganyago said that the Sarb now expected gross domestic product (GDP) growth for 2019 to average 1.3 percent, down from 1.7 percent in January. The forecast for 2020 was 1.8 percent, down from 2 percent, rising to 2 percent for 2021, which would be down from 2.2 percent.
– African News Agency (ANA)