MPC keeps repo rate unchanged at 5.5%

Mike Cohen, Franz Wild

The prime lending rate remains at 9% in the wake of Reserve Bank governor Gill Marcus's announcement that the repurchase rate will be kept at 5.5%.

Most economists surveyed by Bloomberg expected that Reserve Bank governor Gill Marcus would hold rates at 5.5% at the announcement. (Madelene Cronje, M&G)

The Reserve Bank has kept its benchmark interest rate unchanged as a four-month platinum strike dents the nation’s growth prospects and a stronger rand eases pressure on inflation.

The Monetary Policy Committee left the repurchase rate at 5.5%, governor Gill Marcus told reporters in Pretoria on Thursday, matching the forecasts of 26 of 30 economists surveyed by Bloomberg. The others expected a rate increase of 25 basis points to 50 basis points.

Growth in Africa’s second-largest economy is at risk amid a slide in consumer spending and the nation’s longest mining strike that has halted output at operations owned by companies including Anglo American Platinum. That has giving policy makers reason to focus on stimulating economic growth as the rand’s 5.3% gain against the dollar in the past three months helps to contain import prices.

“Inflationary pressure has broadened in recent months, but it is still not alarming or rampant,” Kevin Lings, an economist at Stanlib Asset Management in Johannesburg, said in an emailed note to clients before the rate decision. “Economic activity has softened appreciably in recent weeks.”

Inflation accelerated to 6.1% in April, breaching the central bank’s 3% to 6% target. While the central bank’s mandate is price stability, it is required to take into account the effect of its decisions on the economy and jobs.

Mining production contracted an annual 4.7% in March and 4.5% the month before, the government statistics agency said on May 13. Retail sales growth slowed to 1% from 2.2% in February. – Bloomberg

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