SA Reserve Bank keeps interest rates unchanged

LESETJA Kganyago, governor of South Africa’s central bank, announces interest rates in Pretoria. waldo swiegers Bloomberg
JOHANNESBURG – In the first Monetary Policy Committee (MPC) meeting of 2019, the South African Reserve Bank (Sarb) announced on Thursday that the interest rates for South Africa will remain unchanged from the last meeting which was held in November.
The previous meeting held in November 2018 saw policymakers make the decision on the country’s rates against the backdrop of rising inflation expectations. 
Sarb Governor Lesetja Kganyago announced that the interest rate for SA increased by 25 basis points. The repo is at 6.75 percent
while the prime lending rate will be 10.25 percent
Kganyago said, “
CPI inflation is now expected to peak at around 5.6%, in the first quarter of 2020. Core inflation is expected to remain unchanged at 4.3% in 2018 & forecast to average 5.0% in 2019, 5.1% in 2020 and 4.8% in 2021.”

The announcement made in November last year marked the first rate hike since March 2016.

Ahead of Thursday’s announcement, Kganyago said it was necessary to act then, as delaying the adjustment in interest rates could cause inflation expectations to become entrenched at higher levels.
But while the quarterly projection model which serves as a policy guideline for the South African Reserve Bank’s (Sarb) monetary policy committee suggests three further interest rate hikes by the end of 2020, the Sarb is unlikely to raise interest rates in January, audit firm PwC said this week.

It cited three factors, including fears of a global slowdown which had seen oil prices retreat for much of the fourth quarter of 2018, offering a reprieve for petrol prices.

PwC also noted that South Africa’s economy remained at a cross roads in 2019, with demand pressures weak.
“South Africa’s economy is expected to bounce back somewhat in 2019 and 2020, faciliated by an anticipated cyclical upswing and improvements in economic sentiment helped by recent initiatives like the economic stimulus plan, jobs summit and investment summit,” it said, referring to measures steered by President Cyril Ramaphosa last year.
“However, the possibility of fiscal slippage and a lack of structural reforms can weigh on longer-term economic prospects.”
Watch the full MPC announcement below: 

BUSINESS REPORT ONLINE 

Source: iol.co.za