The repo rate has been left unchanged at 6.5%.
- The SA Reserve Bank’s Monetary Policy Committee (MPC) announced on November 21
- that the repo rate will remain unchanged at 6.5%, with the prime lending rate stable at 10%.
During the announcement, SARB Governor, Lesetja Kganyago, said: “Monetary policy actions will continue to focus on anchoring inflation expectations near the mid-point of the inflation target range in the interest of balanced and sustainable growth. In this persistently uncertain environment, future policy decisions will continue to be highly data-dependent, sensitive to the balance of risks to the outlook, and will seek to look through temporary price shocks.
- Kganyago said the medium-term inflation outlook remains largely unchanged since the MPC’s meeting in September. Headline consumer price index (CPI) inflation is expected to peak at 5.3% in the first quarter of 2020, and to settle at 4.5% in the last quarter of 2021
- The SARB’s forecast for 2019 overall growth was lowered from 0.6% to 0.5%, in line with the Treasury’s forecast. And the risks to the growth forecast are assessed to be to the downside.
- “Implementation of prudent macroeconomic policies and structural reforms that lower costs and increase investment, potential growth and job creation, remains urgent,” said Kganyago.
- “The MPC welcomes the moderation in inflation, and a 25 basis point reduction in the repo rate is projected for the third quarter of 2020.”
- In the currently low CPI inflation environment, a number of analysts expected the SARB to cut interest rates by 25 basis points at its MPC meeting this week, which would have lowered the repo rate to 6.25% and the prime lending rate to 9.75%.
- “If this cut had taken place, however, we believe it unlikely that it would have materially changed the gradually correcting trend in the property market,” said FNB Property Sector Strategist John Loos.
- “We believe that current property market-related sentiment is driven less by interest rate moves and prospects at present and more by economic performance and perceived future economic growth and stability prospects.”