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S. African Reserve Bank keeps repurchase rate unchanged at 7 pct

Xinhua, March 30, 2017 Adjust font size:

The South Africa Reserve Bank (SARB) kept the repo rate unchanged on Thursday as the local political uncertainty takes center stage.

SARB governor Lesetja Kganyago announced that the repo rate will remain unchanged at 7 percent. The prime lending rate will remain at 10.5 percent.

Trade union federation, the Congress of South African Trade Unions (COSATU) expressed its disappointment the decision by SARB's Monetary Policy Committee (MPC) to keep the interest rate unchanged.

"This is yet another squandered and missed opportunity by the bank to give some hope to the more than 9 million South Africans, who remain jobless and trapped in poverty," Sizwe Pamla, national COSATU spokesperson, said on Thursday.

"There seems to be no respite to the Monetary Policy Committee's rigid conservative policies that have already condemned the majority of South Africans to unremitting destitution," added Pamla

This is the second meeting in 2017, by the MPC. The SARB's MPC has left rates unchanged at 7 percent since March last year.

"The MPC assesses the risks of the inflation outlook to be moderately on the upside, mainly due to the high degree of the exchange rate uncertainty," said Kganyago.

He was sanguine and upbeat that inflation will be reined within the target range of 3 percent to 6 percent, but was worried about the weakness of the rand.

An economic expert at the Agricultural Business Chamber, Wandile Sihlobo agreed with the with the governor. He said, "Looking ahead, while we expect the overall food producer inflation to decelerate further over the coming months on the back of large supplies, dairy products and meat inflation could remain at fairly higher levels."

The Reserve Bank governor, however, expressed concern over the political temperature, and how it has been spooking the South African rand. The rand tumbled after President Jacob Zuma recalled Finance Minister Pravin Gordhan and his deputy, Mcebisi Jonas, from their road show to investors in UK and the United States on Monday. This led to tightened fears that the two were to face a chop in a purging reshuffle cabinet.

"Five members preferred an unchanged stance and one member preferred a 25-basis point reduction," he said.

The MPC said it was of the opinion that it "may have reached the end of the tightening cycle."

However, the MPC says the inflation outlook remains at risk due to the exchange rate and political uncertainty in the country. Endit