Interest rates unchanged

·23 May 2013

The repo rate remains unchanged at 5%, the SA Reserve Bank announced on Thursday (23 May).

“The [Monetary Policy Committee] is increasingly concerned about the deteriorating outlook for the South African economy,” said SARB governor Gill Marcus, announcing the rate.

Risks going into the future included inflation being “on the upside”, difficult labour relations and increased wage settlements, higher electricity prices, and a volatile rand.

Year-on-year inflation as measured by the consumer price index (CPI) for all urban areas was 5.9% in April 2013, unchanged from the previous two months.

But the drivers of the overall rate had changed.

Food price inflation measured 6.3% in April, reversing the downward trend that had prevailed since November 2012.

The contribution of food to overall inflation remained unchanged at 0.9%, while housing and utilities contributed 1.4%.

Administered prices increased by 8.9%, and by 7.8% excluding petrol.

Core inflation, which excludes food, petrol, and electricity, measured 5.2%, marginally up from 5.1% in March.

The headline producer price inflation for final manufactured goods measured 5.7% in March, up from 5.4% in February.

Marcus said data indicated that mining production was increasing but output was contracting and “looking bleak”, manufacturing had declined, household consumption was low, retail sales had contracted month on month for March, and unsecured lending for households was still high.

The United States and European economies were still uncertain.

Globally, any buoyant conditions or “excessive liquidity” seen at present, should be considered a “bubble”, not positive growth.

The country’s major banks customarily linked their prime lending rate to changes in the repo rate and, if also unchanged, would be at 8.5%.

Nedbank confirmed that its rate would remained unchanged.

“Nedbank has announced that there will therefore be no change to their current prime overdraft rate, the vehicle and asset finance rate, and the mortgage rate applicable to home loans,” the company said.