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SA Interest Rates Unchanged

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SA Interest Rates Unchanged

The Monetary Policy Committee of the SA Reserve Bank has decided on Thursday to keep the repo rate unchanged at 6.5%.

At its previous meeting in March the MPC decided to cut interest rates by 25 basis points to make the repo rate 6.5%, and the prime lending rate 10%.

The last time SARB cut the repo rate before March was in July 2017, when the MPC reduced the rate by 25 basis points from 7% to 6.75%.

The repo rate is the benchmark interest rate at which SARB lends money to commercial banks and the prime rate the rate at which commercial banks lend money to borrowers.

Ahead of Thursday's MPC announcement analysts polled by Fin24 forecast that the higher inflation print for April made a stronger case for the MPC to keep the repo rate on hold.

Statistics SA's consumer price index for April, meanwhile, came in at 4.5%, compared to 4.1% reported in March.

Fuel hikes and increases in so-called sin taxes drove up inflation, while the impact of the value-added tax increase by one percentage point was more muted, according to FNB senior economic analyst Jason Muscat.

Momentum Investments expected a “stable outlook” for interest rates and possibly a cut in the third quarter of 2018 provided inflation expectations shift to the midpoint of the target band

In March the MPC members were split about the decision to lower the repo rate. At the time SARB governor Lesetja Kganyago said SARB's inflation forecast had shown a moderate improvement. 

Indications were that a low point of the inflation cycle had been reached. The main changes in the forecast related to the exchange rate, among others things, he said.

He cautioned that SARB's 5-year inflation expectations had declined. He said the MPC would prefer its inflation expectation anchor closer to the mid-point of the target range of 3% to 6%.

Author Fin24
Published 24 May 2018 / Views -
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