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Home » Featured IND » SA Reserve Bank keeps interest rates unchanged

SA Reserve Bank keeps interest rates unchanged

The South African Reserve Bank (Sarb) governor Lesetja Kganyago has announced the latest decision on interest rates for the country.

The decision follows the three-day meeting of the Sarb’s Monetary Policy Committee (MPC) which Kganyago chairs.

Kganyago announced that the MPC decided not to make a change to the country’s interest rates.

Earlier this year in July the MPC cut the repo rate by 25 basis points, which took the repo rate to 3.50% per annum.

This means that the prime lending rate in South Africa will remain at 7%.

Kganyago said, “The implied policy rate path of the Quarterly Projection Model indicates no further repo rate cuts in the near term, and two rate increases in the third and fourth quarters of 2021.

’’Monetary policy has eased financial conditions and improved the resilience of households and firms to the economic implications of Covid-19.

’’The Bank has taken important steps to ensure adequate liquidity in domestic markets. Regulatory capital relief has also been provided, sustaining lending by financial institutions to households and firms.”

Kganyago said that monetary policy cannot improve the growth rate of the country.

“Monetary policy however cannot on its own improve the potential growth rate of the economy or reduce fiscal risks. These should be addressed by implementing prudent macroeconomic policies and structural reforms that lower costs generally, and increase investment opportunities, potential growth and job creation.

’’Such steps will enhance the effectiveness of monetary policy and its transmission to the broader economy,” Kganyago said.

Kganyago said during his speech, “Following the 51% q/q (saar) contraction of GDP in Q2, the Bank now forecasts a GDP contraction of 8.2% in 2020, compared to the 7.3% forecast in July. In the outer years, GDP is expected to grow by 3.9% in 2021 and 2.6% in 2022.”

Inflation

“Headline Inflation forecast for 2020 is revised lower to 3.3% from the 3.4% previously promulgated in the July meeting. Overall risks to the inflation outlook appear to be balanced,” Kganyago said.

Kganyago concluded his announcement by saying, “Global economic and financial conditions are expected to remain volatile for the foreseeable future. In this highly uncertain environment, future decisions will continue to be data dependent and sensitive to the balance of risks to the outlook. The MPC will seek to look through temporary price shocks and focus on second round effects. As usual, the repo rate projection from the QPM remains a broad policy guide, changing from meeting to meeting in response to new data and risks.”

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