Guiding consumers since 2009

Repo rate remains at 7%

By Jessica Anne Wood

The Monetary Policy Committee (MPC) announced that the repo rate will remain at 7%. Lesetja Kganyago, governor of the South African Reserve Bank (SARB), said: “The MPC has decided to keep the repurchase rate unchanged at 7% per annum. Five members preferred an unchanged stance and one member preferred a 25 basis point reduction.”

“The MPC is of the view that we may have reached the end of the tightening cycle. However, the Committee would like to see a more sustained improvement in the inflation outlook before reducing rates. This assessment may, however, change if the inflation outlook and the risks to the outlook deteriorate,” added Kganyago.

Following the announcement, First National Bank (FNB) confirmed that its prime lending rate would remain at 10.5% until the next MPC meeting in May.

Jacques Celliers, FNB CEO, said: “With inflation still above 6% but now on a downward path, consumers are eagerly anticipating lower rates. However, the risk of price-shocks may still arise from negative commentary by ratings agencies in mid-2017 and Brexit. For these reasons, we urge consumers to build their budgets based on rates stability. While a rate cut will certainly lift consumer confidence, we should not begin ‘pricing-in’ lower rates until greater certainty emerges.”

Sizwe Nxedlana, chief economist at FNB, added: “While the MPC opted to keep rates unchanged today, the dovish tone of the statement certainly suggests that the bank is less worried about the inflation outlook than it has been in previous months. Downward revisions to the inflation forecast and the weak growth outlook signalled the end of the hiking cycle. However, the MPC will  tread cautiously once again  as it remains cognisant of  policy tightening by the Federal Reserve and the possible upside risk to the rand and consequently  inflation, should fed policy action become more aggressive than is currently assumed. Another concern will be the recent rise in political uncertainty surrounding the finance minister’s future and the potential impact that this can have on the Rand and inflation. The recent political uncertainty and the associated Rand weakness has reduced the odds of a rate cut later this year - for now.”

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