Reserve Bank Governor Tito Mboweni on Thursday announced that the repo rate would remain unchanged at 9%, following the two-day meeting of the monetary policy committee (MPC) this week.
Banks are expected to leave the prime lending rate unchanged at 12,5%.
Mboweni attributed the MPC’s positive inflation outlook to moderate food prices and improving international oil prices. Food price inflation declined from 9,4% in October to 7,7% in December. This was in part due to lower meat price inflation.
While household consumer expenditure remained robust, Mboweni noted that the growth in credit extension to households declined between October and December last year.
Rampant credit extension has been of great concern to the committee in the past, motivating last year’s cumulative 200-basis-point increase in the repo rate.
The MPC statement noted with concern that the trade deficit on the current account more than doubled between the third and fourth quarters of last year. But Mboweni stressed that the committee makes interest rate decisions based on inflation targets and not current account deficit targets.