“Accordingly, the MPC has unanimously chose to keep the repurchase rate at 7% per annum”.
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“These developments will ease inflationary pressures to some extent in the near term and gave the MPC an opportunity to leave the repo rate unchanged against the background of a poorly performing economy”.
However, Sarb Governor Lesetja Kganyago also announced that growth for this years is expected to be zero percent, which is worrying for job creation. The central bank cut its growth forecast for the year to 0 percent from 0.6 percent, Kganyago said.
The economy contracted 1.2% in the first quarter, and the International Monetary Fund’s latest projections for the year put growth at just 0.1%. Looking further ahead, it puts 2017 growth at 1.1%, from a previous 1.3% forecast, and the 2018 outlook is for growth of 1.5% from 1.7% before.
All 16 of the economists surveyed by Business Day had expected rates to be left unchanged on Thursday. “The increase in electricity tariffs has been lower than a year ago”.
The Monetary Policy Committee has raised interest rates by 125 basis points since last July to 7 percent to steer price growth back toward its 3 percent to 6 percent target band even as the economic outlook deteriorated due to weak export demand, the worst drought in more than a century, low commodity prices, and most recently, the U.K.’s vote to quit the European Union. South Africa’s beleaguered rand currency also gained ground compared to the dollar, the euro and-most significantly-the British pound.
“Although this has been anticipated to have been the low point of the cycle, the recovery is expected to be good”.
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Kganyago said recent economic data suggest that positive growth was recorded in the second quarter, with the mining and manufacturing sectors expected to add positively to growth.
