Reserve Bank leaves repo rate unchanged at 6.75%
The reserve bank governor says they are satisfied that interest rates are not out of control, though they are concerned about weak growth, both in SA and abroad.
South African Reserve Bank Governor Lesetja Kganyago.
SA Reserve Bank (Sarb) governor Lesetja Kganyago announced at the bank on Thursday that they had decided to leave the repo rate unchanged.
The Sarb's #MPC has decided to keep the repo rate unchanged at 6.75% per annum.
— Moneyweb News (@Moneyweb) March 28, 2019
The markets had widely expected the central bank to keep the repo rate on hold at 6.75% on the back of a depreciating rand.
Last year the bank unexpectedly raised the rate even though inflation remained contained within target while economic growth was still worryingly anaemic.
Kganyago: Previous MPC statement highlighted risks such as volatile oil and food prices. Assumptions for Brent crude revised up from $62/barrel to $64/barrel for 2019. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
The increase of 25 basis points took the rate to 6.75%. The prime lending rate rose to 10.25%.
Kganyago said the Monetary Policy Committee unanimously decided to keep the rate unchanged today.
Kganyago: Global #GDP expected to pick up but risks remain on downside. Rising geopolitical risks, including a no-deal Brexit, could further weaken growth environment. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
The rand weakened against the dollar on Thursday morning ahead of the SARB rate decision later in the day.
At lunchtime on Thursday, the rand was trading at R14.69/$1, up 0.61 percent.
Moody’s Rating Agency is expected to release its rating decision on South Africa on Friday and, on the international front, the United Kingdom’s looming decision on Brexit is expected to have severe consequences on the British pound. Sterling has tumbled as uncertainty over Britain’s exit from the EU dampened investor interest in the currency.
Kganyago: Although global growth conditions remain benign, pace of growth slower than expected. Concerns around ongoing trade tensions, tariff hikes as well as country-specific factors. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
Should Moody’s deliver a downgrade to SA’s rating, this will push the country into sub-investment grade and marked currency weakness would be likely, along with higher bond yields and short-term money market rates.
Kganyago: Average #inflation expectations have been declining since end 2017. Inflation expectations in Q1 2019 declined from 5.4% to 4.8% for 2019. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
Kganyago: Global #GDP expected to pick up but risks remain on downside. Rising geopolitical risks, including a no-deal Brexit, could further weaken growth environment. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
Kganyago: Since the January #MPC meeting, the rand has depreciated 6.4% against the US dollar. #Sarb
— Moneyweb News (@Moneyweb) March 28, 2019
Kganyago: MPC takes note of recent inflation outcomes and welcomes moderation in inflation expectations. Risks to inflation outlook more or less evenly balanced. Rising prices (electricity, food, oil) key risks. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
Kganyago: Household consumption expenditure remains constrained by low employment growth, electricity hikes. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
Kganyago: Electricity constraints weigh on forecast. Inflation continues to show near-term downside surprises. y/y inflation rate as measured by CPI was 4.1% in Feb, up from 4% in Jan. #Sarb #MPC
— Moneyweb News (@Moneyweb) March 28, 2019
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