South Africa Leaves Rates on Hold

The South African Reserve Bank left its benchmark repo rate on hold at 6 percent in September of 2015 as widely expected, following a 25bsp hike in the previous meeting. Yet, policymakers said growth outlook has deteriorated while the rand fell further, intensifying the upside risks to the inflation outlook.

The prime rate was also left on hold 9.5 percent.

The central bank revised its growth and inflation forecasts. Inflation is now expected at 4.7 percent in 2015, down from an early 5 percent while the growth outlook was revised down by 0.5 percent to 1.5 percent this year. 

Excerpts from the statement issued by Lesetja Kganyago:

The MPC is also concerned about domestic growth prospects, with the economy contracting in the second quarter. Growth is expected to remain constrained by global developments and associated uncertainty and volatility, low business and consumer confidence and electricity supply shortages. Domestic inflation is not driven by demand factors, and the outlook for household consumption expenditure has deteriorated. However, we have to be mindful of the second-round effects of supply-side shocks on inflation. There are a number of upside risks to the inflation outlook, the primary one being the exchange rate which has already depreciated significantly against the advanced economy currencies in response to global developments, and is still likely to react further to the commencement of US monetary policy tightening. A further risk emanates from possible higher multi-year increases in electricity tariffs from the middle of next year. Downside risks to the inflation outlook include international oil prices should they be sustained at current levels. In addition, weak domestic demand may continue to constrain pricing power in the economy. The Committee nevertheless assesses the overall risks to the inflation outlook to be on the upside.

South Africa Leaves Rates on Hold

South African Reserve Bank | Joana Taborda |
9/23/2015 3:08:19 PM