No increase in interest rate

The Reserve Bank’s Monetary Policy Committee (MPC) has left the repo rate unchanged at 5.5% per annum.

South African money

“The MPC has decided to keep the repurchase rate unchanged at 5.5% per annum,” Reserve Bank Governor Gill Marcus said on Thursday.

The bank’s forecast for headline inflation is unchanged for 2014 and is expected to average 6.3% with a 6.6% peak expected in the fourth quarter of 2014.

Since the last meeting of the MPC, the rand has been relatively volatile, having fluctuated between R11.39 and R10.60 against the dollar.

There has been an appreciation trend over the period. The rand has appreciated by about 2.4% against the dollar and 2.2% on a trade weighted basis.

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“While the risk to the inflation outlook from the exchange rate may have moderated somewhat since the previous meeting, these risks are still assessed to be on the upside,” she said.

JBay WinterFest

The committee is of the view that the exchange rate will continue to be highly “sensitive” against global and domestic developments.

South Africa’s economic growth outlook remains subdued with economic growth expected to remain below potential of between 3% and 3.5% in 2014.

Some analysts expected the bank to keep the repo rate unchanged, while others expected a 50 basis points increase.