PRETORIA – South Africa’s central bank left its main interest rate on hold at 6.5% on Thursday as expected, saying it would like to see inflation expectations anchored closer to the midpoint of its target range.
South African Reserve Bank Governor Lesetja Kganyago on Thursday said this is in line with market expectation.
Addressing reporters, the Governor said monetary policy actions will continue to focus on anchoring inflation expectations near the mid-point of the inflation target range in the interest of balanced and sustainable growth.
“In this persistently uncertain environment, future policy decisions will continue to be highly data-dependent, sensitive to the assessment of the balance of risks to the outlook, and will seek to look-through temporary price shocks,” he said.
The consumer reprieve comes after the Monetary Policy Committee (MPC) in July cut the repo rate by 25 basis points. The MPC announced the decision following its meeting, which got underway in Pretoria on Tuesday.
Since the July meeting of the MPC, Kganyago said, economic indicators confirm weaker global economic conditions and low inflation.
“Central banks in advanced economies have provided more monetary accommodation, helping to ease global financial conditions. Downside risks from escalating trade and geopolitical tensions remain pronounced,” he said.
South Africa has seen benign inflation outcomes this year, but growth has been sluggish. That has piled pressure on President Cyril Ramaphosa, who has staked his reputation on lifting the economy out of a deep slump.
The South African Reserve Bank left its 2019 economic growth forecast unchanged at 0.6% but cut its forecasts for growth in 2020 and 2021 to 1.5% and 1.8%, respectively.
It repeated calls for structural reforms to raise potential growth rate, saying weakness in many sectors of the economy remained a cause for concern.
