JOHANNESBURG – South Africa’s Monetary Policy Committee will announce its rates decision on Thursday.
But with the rand performing well, analysts are expecting the Reserve Bank to leave the repo rate unchanged at 7 percent.
At the South African Reserve Bank’s last MPC meeting, the panel kept the repo rate unchanged at 7 percent, after inflation hit 7 percent in February.
The same decision is expected this time round.
Dr Azar Jammine, Econometrix Chief Economist says, “Without a doubt, there has never been in recent times where a repo rate decision is so certain, the Sarb will hold rates. Until now the bank has been talking about possibly rates to dampen inflation rates. The increase in electricity tariffs has been lower than a year ago.”
The local currency has strengthened in recent times, also easing inflationary pressures.
The rand strengthened by 5.6 percent to R14.70 against the US dollar at the end of June.
And it wasn’t affected by the Brexit decision and Turkey’s foiled coup attempt.
When the central bank makes its decision on rates, it’s expected to take into account several factors, among them the stable inflation outlook and the weak economy.
“If the rest of the world is not increasing interest rates then there is no pressure on local authorities to raise rates, the Sarb will be constrained to raise rates anytime soon,” added Jammine.
Maintaining the repo rate at 7 percent and the prime lending rate at 10.5 percent will give heavily-indebted households some breathing space.
While the rate of credit extension is expected to remain low, Jammine says there is negative sentiment among global ratings agencies about South Africa’s growth prospects.
But he insists growth is possible – even though it may be marginal.
eNCA
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