Repo rate remains unchanged at 6.75%

Posted On Thursday, 23 November 2017 21:00 Published by
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The Reserve Bank on Thursday kept the repo rate unchanged at 6.75% per annum, Reserve Bank Governor Lesetja Kganyago said.

“The Monetary Policy Committee (MPC) 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,” he said.

Nedbank economists had predicted that the bank would keep the repo rate unchanged owing to policy and political uncertainty in the country and their likely impact on the currency.

The governor said international oil-prices have re-emerged as an upside risk to domestic and global inflation.

The central bank further added that the combination of a weaker exchange rate and higher product prices has resulted in a cumulative increase in domestic petrol prices by R1 per litre since September.

Commenting on the announcement, Dr Andrew Golding, CE of the Pam Golding Property group was not surprised at MPC’s ‘wait-and-see’ approach. 

"With all eyes on tomorrow’s (Friday’s) announcements by the credit ratings agencies in respect of a possible further downgrade for South Africa, as was widely anticipated, the Monetary Policy Committee adopted a ‘wait and see’ approach and kept the repo rate steady.

With consumer inflation seemingly under control, but with this month’s (November) fuel hike and Eskom seeking a dramatic escalation in tariffs, coupled with political uncertainty ahead of the ANC elective conference in December and the likelihood of the US Federal Reserve raising interest rates before the year-end, the MPC was expected to take a hawkish view."

Kganyago said although inflation is expected to remain within the target range over the forecast period, the risks to the outlook are assessed to be on the upside at a time when imminent key event risks contribute to an environment of particularly elevated uncertainty.

The bank said since its last meeting the deterioration in the fiscal stance has increased the risk of a sovereign ratings downgrade of domestic currency bonds to sub-investment grade.

This, it said, could precipitate a significant sell-off of domestic government bonds by non-residents, with implications for the exchange rate and long-term bond yields.

“Should this occur, there is the possibility of a short- term overreaction, and a possible partial recovery later on. The precise path and duration is highly uncertain,” said the Governor.

This as credit rating agencies Moody’s Investor Services and Standard and Poor’s are expected to deliver credit rating updates tomorrow.

When coming to the domestic economic growth outlook, the MPC said this remains subdued but positive.

“Both consumer and business confidence remain low and are also likely to be affected by political developments in December.”

Last modified on Friday, 24 November 2017 08:40

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