South Africa Info Forums

Full Version: Repo rate unchanged at 5.5 percent
You're currently viewing a stripped down version of our content. View the full version with proper formatting.
The Reserve Bank’s Monetary Policy Committee (MPC) has left the repo rate unchanged at 5.5% per annum.

“The MPC has decided to keep the repurchase rate unchanged at 5.5% per annum,” Reserve Bank Governor Gill Marcus said on Thursday.

The bank’s forecast for headline inflation is unchanged for 2014 and is expected to average 6.3% with a 6.6% peak expected in the fourth quarter of 2014.

Since the last meeting of the MPC, the rand has been relatively volatile, having fluctuated between R11.39 and R10.60 against the dollar. There has been an appreciation trend over the period. The rand has appreciated by about 2.4% against the dollar and 2.2% on a trade weighted basis.

“While the risk to the inflation outlook from the exchange rate may have moderated somewhat since the previous meeting, these risks are still assessed to be on the upside,” she said.

The committee is of the view that the exchange rate will continue to be highly “sensitive” against global and domestic developments.

South Africa’s economic growth outlook remains subdued with economic growth expected to remain below potential of between 3% and 3.5% in 2014.

“The bank’s forecast for economic growth has declined to 2.6% in 2014, compared with 2.8% previously, while the forecast for 2015 has been revised down from 3.3% to 3.1%.

“The risks to this forecast are seen to be on the downside, given the protracted strike in the platinum sector and electricity supply constraints,” explained the Governor.

The trend in wage settlements has remained relatively unchanged.

“We wish to reiterate that even though we are in a tightening cycle, there will not necessarily be a change in the stance at every meeting, and that the increments may not always be of the same magnitude,” said Governor Marcus.

Some analysts expected the bank to keep the repo rate unchanged, while others expected a 50 basis points increase.

Absa, in a research note earlier today, said: “We expect the bank to hike rates but we acknowledge that the strength of the rand and the absence, so far, of substantial pass-through from rand depreciation to higher consumer prices means there are risks to our call.

“If the SARB does not hike, we view it as a postponement of the 100 basis points of tightening we forecast for this year. In our MPC tracker published last week, we highlighted the economic data that could feed into the SARB’s deliberations”. - SAnews.gov.za