SA Central Bank Holds Repo Rate in Tight Call, Stimulus Package Announcement Tomorrow
PRETORIA – South Africa’s central bank left its benchmark repo rate on hold at 6.5 percent on Thursday, in a tight call, with the bank’s governor striking a more hawkish note than at the last rate meeting in July. The rate decision by the South African Reserve Bank (SARB) was closely watched after emerging market […]
PRETORIA – South Africa’s central bank left its benchmark repo rate on hold at 6.5 percent on Thursday, in a tight call, with the bank’s governor striking a more hawkish note than at the last rate meeting in July.
The rate decision by the South African Reserve Bank (SARB) was closely watched after emerging market peers Turkey and Russia raised their main lending rates recently.
Four members of the Monetary Policy Committee voted for no change in rates and three voted for a 25 basis points increase.
The SARB had to weigh data showing that the economy entered recession in the second quarter against risks to its inflation forecasts from the rand, which has lost more than 6 percent since the bank’s last rate meeting in July.
A rate hike would have dealt a further blow to South Africa’s sputtering economy, which President Cyril Ramaphosa is trying to revive after a decade of stagnation.
“The committee continues to be of the view that current challenges facing the economy are primarily structural in nature and cannot be solved by monetary policy alone,” SARB Governor Lesetja Kganyago told a news conference in Pretoria.
Kganyago said the inflation outlook had deteriorated due to the weaker rand and high oil prices.
“At current levels, the SARB’s model assess the rand to be undervalued,” he added.
President Cyril Ramaphosa is tomorrow expected to deliver the much-anticipated stimulus package aimed at uplifting the country’s distressed economy.
The plan was deliberated and approved in this week’s Cabinet meeting.
The planned stimulus package proposes measures to reignite the country’s economy from a number of related portfolios, Communications Minister Nomvula Mokonyane said during a post-Cabinet media briefing on Thursday.
“The meeting agreed that South Africa’s economic recovery demands urgent implementation of the stimulus package and promised growth-enhancing reforms. Proposals were also discussed to establish an infrastructure-development initiative that draws in private sector funding and delivery expertise,” the Minister said.
South Africa is currently in a technical recession after data released by Statistics SA revealed that the economy had declined by 0.7% in the second quarter of 2018. In the first quarter of the year, the economy had shrunk by 2.6%.
Responding to a question, Mokonyane said Cabinet had deliberated on how high crime rates were affecting economic growth.
“We continuously agree that crime may have serious [effects] on investment but what is important is the need for partnership, as it is not only police who deal with crime. There are both social and economic factors that need to be attended to, including the behaviour of individuals and rights and responsibilities.”
The stimulus package is expected to touch on some of the key drivers of growth, including tourism, manufacturing and infrastructure development.
Sources include Reuters and SANews.
(Reporting by Olivia Kumwenda-Mtambo, Mfuneko Toyana and Nomvelo Chalumbira; Writing by Alexander Winning; Editing by James Macharia and Jenni Baxter)