Reserve Bank keeps repo rate unchanged

The South African Reserve Bank has kept the repo rate unchanged at 5.75% per annum.

South African money

“The MPC has unanimously decided to keep the repurchase rate unchanged for now,” Reserve Bank Governor Lesetja Kganyago said on Thursday.

The repo rate has remained unchanged since a 25 basis points rate hike in July 2014.

According to the Bank’s latest forecasts, inflation is now expected to average 4.8% in 2015, compared with the previous forecast of 3.8%.

Inflation is expected to average 5.5% in the final quarter of the year, compared with the previous forecast of 5.3%.

The governor further added that the outlook for the economy remains overshadowed by the electricity supply constraint, which appears to have had an adverse effect on recent economic activity.

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true feb 2015

The bank’s growth forecast for 2015 is unchanged at 2.2% and marginally lower at 2.3% for 2016.

The rand exchange rate continues to be the main upside risk to the inflation outlook, and remains highly vulnerable to the timing and pace of US monetary policy normalisation.

Additionally, wage and salary increases in excess of inflation and productivity growth also pose an upside risk to inflation.

“The Committee assesses the risk to the inflation outlook to be on the upside, with the possibility of further electricity tariff increases accentuating this risk,” noted the governor.

At the same time, the growth outlook remains constrained by electricity supply concerns and low business confidence.