Reserve Bank decides to keep repo rate unchanged
Though the rand is slightly steadier, the repo rate did not drop as was predicted a week ago.
All the focus was on the South African Reserve Bank Governor, Lesetja Kganyago, who was scheduled to announce the Bank’s decision on the repo rate.
On Thursday, 21 September, the interest rate was held at 6,75 per cent with the lending rate still at 10,25 per cent.
The Reserve Bank anticipates a 0,60 per cent growth in the economy, and inflation of about 5,70 per cent. Next year, the economy is expected to show a steady increase of 1,62 per cent with inflation rising to about 5,80 per cent.
“The rand remains sensitive to political developments, weak economic growth prospects and the risks of further sovereign downgrades – longer-term bond yields and the rand remain in danger of a sell-off if South Africa is downgraded further,” said Kganyago.
He said food prices moderated further and if the Bank’s forecast for Consumer Price Index inflation remains the same, an economic turning point is expected in the first quarter of next year.
The economy recorded a positive growth in the second quarter of this year, while growth prospects are still subdued. Economists note that the economy needs an improvement with an interest rate drop of at least 25 basis points.
However, the local economy has strengthened and jumped out of the technical recession with a 2,5 per cent rise.
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