Reserve Bank keeps repo rate unchanged at 6.75%

South African Reserve Bank (Sarb) Governor Lesetja Kganyago on Thursday said employment prospects in one of Africa’s dominant economies remain unfavourable, with a possibility of further job losses in the public sector.

Addressing media in Pretoria, following a meeting of the monetary policy committee (MPC), which he chairs, Kganyago said since the previous meeting of the MPC, upside risks to the inflation outlook had increased, mainly due to higher international oil prices and a weaker rand exchange rate.

Kganyago announced that the apex bank was keeping the repurchase rate unchanged at 6.75 percent.

“The inflation forecast generated by the [central] Bank’s Quartely Projection Model (QPM) shows a deterioration since September. The average forecast for 2017 is unchanged at 5.3 percent, but has been revised upwards for 2018 and 2019 to 5.2 percent and 5.5 percent, from 5.1 percent and 5.4 percent previously. The lower turning point, which is expected in the first quarter of 2018, increased from 4.5 percent to 4.7 percent,” said Kganyago.
The Governor said since the previous meeting of the monetary policy committee, the South African Rand has depreciated by 3.6 percent against the US Dollar, by 3.0 percent against other Euro, and by 3.3 percent on a trade-weighted basis.

“The rand recorded a weak point of around R14.55 against the US dollar in mid-November, but has recovered somewhat since then. Factors that impacted on the rand during the period included the ongoing uncertainty with regard to the outcome of the ANC electoral conference in December; concerns about a faster pace monetary tightening in the US; the negative reaction to the Medium Term Budget Policy Statement; and speculation regarding the introduction of free higher education in South Africa,” said Kganyago.

“These latter two factors have raised the risk of sovereign ratings downgrades, a risk that has been hanging over the rand for some time.”

On the jobs front, the Sarb was far from being impressed, raising the alarm bells for further job losses in the public sector.

“Employment prospects remain unfavourable. According to the Quarterly Labour Force Survey conducted by Statistics South Africa, year-on-year growth of total employment measured 2.3 percent in the third quarter of 2017. Despite this increase, the official unemployment rate was unchanged at 22.7 percent for the third successive quarter. Fiscal constraints point to further job losses in the public sector,” he said.

“In the light of the high degree of uncertainty prevailing in the economy and the balance of risks, the monetary policy committee has decided that it would be prudent to maintain the current stance of monetary policy at this stage. Accordingly, the repurchase rate remains unchanged at 6.75 per annum,” said Kganyago.

In September, the apex bank kept its repurchase rate, the benchmark for the market, at the 6.75 percent, despite calls by beleaguered South Africans to lower borrowing costs and help boost an economy still limping after languishing in recession earlier this year.

– African News Agency (ANA)