Sarb keeps interest rate on hold

The Reserve Bank’s Monetary Policy Committee has decided to keep the main lending rate at 6.5%. 

Reserve Bank Governor Lesetja Kganyago made the announcement on Thursday in the capital.

This is the Central Bank’s penultimate announcement for the year. It follows a rate cut of 25 basis points following its previous meeting. 

INFLATION

“The medium-term inflation outlook is largely unchanged.

“Electricity, food and fuel price inflation continue to shape the near and medium-term trajectory of headline inflation.”

GROWTH

“In the second quarter of this year, South Africa‘s GDP rebounded from the contraction experienced in the first quarter, but economic activity levels still remain weak.”

“While global growth remains resilient, recent indicators on trade and manufacturing have deteriorated and a range of downside risks to growth remain.”

“Based on recent short term economic indicators for the mining and manufacturing sectors, the third quarter GDP outcome is expected to be muted.”

The forecast of GDP growth for 2019 remains unchanged at 0.6%. The forecasts for 2020 and 2021 have decreased to 1.5% (from 1.8%) and 1.8% (from 2.0%), respectively, due to revisions to global growth and domestic potential growth. pic.twitter.com/7J7ZHWo2NU

— SA Reserve Bank (@SAReserveBank) September 19, 2019

RAND

“The QPM (Quarterly Projection Model) assesses the rand to remain slightly undervalued. While the rand has benefited from improvements in global sentiment, investors remain concerned about domestic growth prospects and fiscal risks.”

Prior to the meeting, analysts generally predicted that rates were be on hold, with PwC’s Strategy& saying: Given the central bank’s forecast (in July) of economic growth rebounding to 1.8% in 2020, and even considering a likely downward revision to the number this week, the small potential boost would not be enough to sway policymakers’ votes for a rate cut.”

Developing story.