Off the wire
• El Salvador calls for more efforts to address issue of mass migration  • Azerbaijan agrees to freeze oil production at "certain level"  • UN chief hopes for early German ratification of Paris accord on climate change  • U.S. stocks extend gains after Fed decision  • Interview: Egypt's youngest female lawmaker urges further support for Paralympians  • OPEC to hold informal meeting in Algeria next week  • 1st LD: Premier Li says China, Canada begin exploratory talks on free trade agreement  • Roundup: Turkish military officer to appeal negative ruling of Greek Asylum Service within two weeks: lawyer  • Roundup: FAO, global partners set to bridge Africa's rice production gap  • Nigeria nabs militant behind pipeline bombings  
You are here: 　 Home

Roundup: S. Africa's repo rate kept unchanged benefits customers: economists

Xinhua, September 23, 2016 Adjust font size:

The biggest beneficiary of the unchanged repo rate in South Africa is the consumer, economists said on Thursday after the central bank decided to keep the repo rate unchanged.

"This can be a huge relief (for customers) in terms of price pressures at the stores," Investment Solutions' chief economist Lesiba Mothata said.

The South African Reserve Bank (SARB) announced on Thursday that it will keep the repurchase rate unchanged at seven percent per annum. The prime-lending rate remains constant at 10.50 percent.

"Given improvements in the inflation forecast, the weak domestic economic outlook and the assessment of the balance of risks, the MPC has unanimously decided to keep the repurchase rate unchanged at 7.0 percent per annum," SARB Governor Lesetja Kganyago said.

The decision did not come as a surprise as it fell in line with the expectation of many economists.

The SARB was concerned by the sluggish growth of the country's economy, and had anticipated a zero growth this year.

The bank said inflation remains a matter of concern.

The decision to leave the repo rate unchanged could have been also necessitated by positive figures of consumer price inflation which was at 5.9 percent year-on-year in August, according to data released by the Statistics South Africa on Wednesday.

The SARB can't hike rates because that will stall growth further, especially if forecast is zero growth for 2016, Mothata told Xinhua.

Core inflation which excludes the prices of food, non-alcoholic beverages, petrol and energy remains unchanged at 5.7 percent year-on-year but slowed to 0.2 percent month-on-month from 0.6 percent.

There has been some reprieve for consumers as inflation dropped marginally in August. Consumers are under pressure from high food prices as a persistent drought takes its toll.

Luke Doig, a senior economist at Credit Guarantee Insurance, said the SARB was pushed to leave the repurchase rate unchanged by the global issues.

"The Reserve Bank was put in a difficult position by the volatile and unpredictable U.S. Fed's decision," he said.

Doig said he expected one further hike in the near-to medium-term.

Food inflation is expected to peak at 12.3 percent in the fourth quarter.

"Food prices remain a significant driver of inflation given the persistent drought, although long-range weather forecasts suggest improved rainfall prospects in the coming months," SARB Governor Kganyago said.

"While domestic economic growth prospects appear more favourable following the positive surprise in the second quarter of this year, the outlook remains constrained against a backdrop of weak domestic fixed investment and low levels of business and consumer confidence," Kganyago said.

Food inflation is high because of the prolonged effects of the drought and the weakness in the rand earlier in the year. Endit