The Reserve Bank’s Monetary Policy Committee has decided to keep South Africa’s repo rate unchanged.
The repurchase rate is unchanged at 6.5% per annum, with the base home loan rate at 10%.
While the rate hold was widely expected after better-than-projected inflation data this week, the decision was a close call. Four members preferred an unchanged stance and three members preferred a 25 basis points increase.
“The MPC continues to assess the stance of the monetary policy to be accommodative. However, the MPC remains concerned about the deteriorating inflation outlook, driven mainly by multiple supply-side factors,” said Reserve Bank governor, Lesetja Kganyago.
“The approach of the MPC continues to be to look through the first-round affects and focus on the possible second round effects. With risks and uncertainties at higher levels, the MPC will continue to be vigilant and will not hesitate to act should it become necessary,” he said.
The rand gained 1.86% against the greenback in the lead up to the interest rate decision by the SARB, remaining relatively stable during the MPC media conference.
Kganyago highlighted that the economic battle of South Africa is mostly structural, which requires firm action by the government, while monetary policy is mostly successful when addressing cyclical growth.
The rand remained stable at R14.42/$.
The decision to hold rates was welcomed by the property sector, with Stuart Manning, CEO for the Seeff Property Group saying that it will give some relief to consumers in the current economic climate.
Given the recessionary outlook, renewed currency volatility and inflation creep, economists were divided ahead of the decision, and Manning warned that this is likely to be a short-term breather as a rate hike may well come sooner than hoped.