Business

No repo rate Christmas bonus from Reserve Bank

Lisa Steyn

The South African Reserve Bank has announced it would stick to its accommodative stance on monetary policy.

Reserve Bank governor Gill Marcus said the Consumer Price Index in October rose to 5.6% year on year. (Madelene Cronje, M&G)

The bank decided to hold the repo rate at 5% for the second consecutive meeting.

Reserve Bank governor Gill Marcus said the Consumer Price Index in October rose to 5.6% year on year, up from 5.5% in September, and it was edging closer to the upper end of the target range of between 3% and 6%.

Domestic factors had been the dominant determinants of the weaker exchange rate, Marcus said, and the rand had weakened by 6.7% against the US dollar since the last meeting of the monetary policy committee.

Labour unrest, a widening trade deficit and a ratings downgrade by two agencies had taken a toll on the currency.

Marcus said: "We [the bank] are concerned about recent trends in wage settlements and their potential negative effect on the economy."

She said above-inflation wage increases presented the danger of a wage price spiral and, inevitably, "it's the workers who will bear the brunt of the fallout".

Marcus said another major concern was rising food prices, which posed a significant risk to the global inflation outlook, although data suggests that maize prices may be moderating.

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