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SA Reserve Bank Increase The Repurchase Rate To 6.75%

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SA Reserve Bank Increase The Repurchase Rate To 6.75%

JOHANNESBURG - The South African Reserve Bank (SARB) announced on Thursday that the interest rates for South Africa will be increased from 23 November 2018.

This was the last  Monetary Policy Committee (MPC) meeting of the SARB in 2018, which saw  policymakers make the decision on the country's rates  against the backdrop of rising inflation expectations.

The SARB Governor Lesetja Kganyago announced that the interest rate for SA would be increased by 25 basis points.  The interest rate has now increased by 25 basis points, the repo is at 6.75 percent while the prime lending rate will be 10.25 percent. This marks the first rate hike since March 2016.

Kganyago said, " Headline inflation is now expected to average 4.7 percent in 2018 (down from 4.8 percent), before increasing to 5.5 percent in 2019 (down from 5.7 percent) and moderating to an unchanged 5.4 percent in 2020. Headline CPI inflation is now expected to peak at around 5.6 percent, in the third quarter of 2019. The Sard now forecasts growth in 2018 to average 0.6 percent (down from 0.7 percent in September). The forecast for 2019 and 2020 is unchanged at 1.9 percentand 2 percent respectively. At these growth rates, the negative output gap is wider than at the time of the previous MPC meeting. The output gap will narrow but will not close by the end of 2020, as previously expected." 

The central bank cut the benchmark repurchase rate at which it lends to commercial banks by 25 basis points at its second meeting of the year in March, but has kept it steady at 6.5 percent since. 

In turn, commercial banks have kept the prime lending rate to consumers at 10 percent since a similar March reduction.

Annual consumer inflation has risen steadily from 3.8 percent year-on-year in March to 5.1 percent in October, according to data from Statistics South Africa, but is still inside the Reserve Bank's 3-6 percent target band.

Ahead of the announcement on Thursday, Bank of America Merrill Lynch analysts Ferhan Salman and Rukayat Yusuf said,  "We think the Sarb is likely to keep the policy rate at 6.5 percent. " 

They also added that there was scope for a 25 basis point hike next January.

"We believe the lagging cyclical recovery, easing oil prices and rand recovery buy the SARB more time to assess the state of the economy in the third quarter GDP print and inflation momentum thereafter."

Author Business Report
Published 22 Nov 2018 / Views -
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