MPC KEEPS REPO RATE UNCHANGED AT 5%

Fol­low­ing its mon­e­tary police committee’s three-day meet­ing, the South African Reserve Bank has left the repo rate at 5% for the third time.

“The MPC has decided to keep the repo rates unchanged at 5% per annum,” Reserve Bank gov­er­nor Gill Mar­cus said on Thurs­day, after the committee’s three-day meet­ing in Pre­to­ria this week.

The deci­sion means the prime inter­est rate for bank lend­ing remains at 8.5%.

The bank has kept the repo rate at 5% since July last year, when it dropped it by half a per­cent­age point.

Mar­cus noted that a pos­si­ble spike in infla­tion remained a key con­cern due to a recent slide in the value of the rand after hit­ting a four-year low of R9.29 to the dol­lar ear­lier in March.

“The com­mit­tee will con­tinue to apply mon­e­tary pol­icy con­sis­tent with its man­date of price sta­bil­ity within a flex­i­ble infla­tion tar­get­ing envi­ron­ment,” she added.

But Mar­cus said that even though the infla­tion out­look dete­ri­o­rated, the MPC expected infla­tion to remain within its offi­cial 3% to 6% tar­get range at an aver­age of 5.9% in 2013.

No change expected
Mar­cus also warned the country’s growth prospects remained sub­dued and pro­jected gross domes­tic prod­uct (GDP) would grow by only 2.7% this year and 3.7% in 2014.

She also noted that South Africa’s econ­omy was still per­form­ing below its potential.

“I don’t think any­one was expect­ing a change in inter­est rates and right­fully so,” said Chris Hart, chief econ­o­mist at Invest­ment Solutions.

“The Reserve Bank is in a tough spot at the moment as growth is depressed but infla­tion is grow­ing but it would have been a bad idea to tam­per with the inter­est rates at this stage.”

Hart’s view was echoed Ade­naan Har­dien, senior econ­o­mist at Cadiz.

“We pre­dict the next move on inter­est rates to come out at the end of 2014 with an increase being brought in,” he said.

“But this will be depen­dent on our real growth prospects and of course what hap­pens with the rand dur­ing that period.”

Source: Mail & Guardian
Source Link: http://mg.co.za/article/2013–03-20-repo-rate-once-again-unchanged