South Africa: SARB Keeps Interest Rate Steady

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South African Reserve Bank (SARB) Governor Lesetja Kganyago,has announced on Thursday that the bank’s monetary policy committee has decided to leave the interest rate unchanged at its second meeting this year.The repurchase rate, which is the interest rate at which the Sarb lends money to commercial banks, has been steady at 7percent, while the prime lending rate, which is the rate at which banks lend money to consumers, has been at 10.5%.
The repurchase rate was last cut in July 2012, when then-governor Gill Marcus dropped it by 50 basis points to 5percent, the lowest in at least 14 years, reported Bloomberg.

Economists earlier predicted that interest rates were likely to remain at 7percent, despite risks to inflation having eased since the MPC’s meeting in January.

BNP Paribas economist Jeffrey Schultz in a company note said Kganyago was unlikely to bow to pressure to call the top of the hiking cycle just yet.

“Since the Monetary Policy Committee met in January, both the global and the domestic macroeconomic environment have not really changed a great deal. Front of mind for the SARB however will be the rand’s resilience to a US Fed rate hike earlier this month, which has actually shown the currency strengthen against the US$ in real effective terms as well as among most of its emerging market peers.”

However, some traders were adding to bets on the first South African rate cut in more than four years after data showed the current account deficit, a key risk for the rand, narrowed and consumer inflation slowed for a second month.

The current account shortfall narrowed to 1.7 percent of gross domestic product in the fourth quarter, less than the median forecast of 3.2 percent, according to estimates compiled by Bloomberg.Consumer inflation slowed to 6.3percent in February from a year ago, in line with expectations.

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