SARB misses Opportunity to stimulate Economy by leaving Rates unchanged

As feared by most, the SA Reserve Bank’s monetary policy committee left the repo rate unchanged at 6.5%. The prime rate will remain 10.25%. The announcement was made by the central bank’s governor Lesetja Kganyago at a media briefing in Pretoria on Thursday afternoon. The decision was unanimous, Kganyago said. The repo rate is the benchmark interest rate at which the Reserve Bank lends money to other banks. Changes in the repo rate affect the prime lending rate, which is the lowest rate at which banks start lending to clients.

In July, the Reserve Bank cut the repo rate by 25 basis points rate cut to 6.5%. That was the first rate cut in more than a year, Kganyago noted that while growth rebounded in the second quarter of the GDP rebounded, economic activity remains weak, but it did not motivate the MPC enigh to lower rates again.

Kganyago says longer-term weakness in most sectors remain a serious concern, and expected “muted” third-quarter growth as business confidence declined further. The MPC is closely watching South Africa’s consumer inflation number which rose by 4.3% in August, compared to 4% in July. August’s increase was slightly higher than expected

Annual food inflation reached its highest level in 18 months, registering 3.8% in August due to higher bread and maize meal prices. Also, fuel prices could be adding to inflation pressures in coming months. The petrol price was on track to be lowered in the first week of October – until Saturday’s drone and missile attack on Saudi Arabian oil facilities resulted in a record jump in the oil price. According to the latest estimates, the petrol price will now be hiked by 2c a litre.

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