Interest rates remain unchanged at 5.5%

The South African Reserve Bank (SARB) kept the repo rate unchanged at 5.5% on Thursday after a three-day monetary policy committee (MPC) meeting.

“The repo rate remains at 5.5% with the prime interest rate at 9%,” SARB governor Gill Marcus told reporters in Pretoria.

This is the seventh consecutive decision keeping rates unchanged, with the last change being a 0.5% drop in November 2010.

The move keeps interest rates at their lowest in over 30 years.

“[In] creating a stable environment, in [as far] as you can in uncertain and unstable conditions, the best move was to keep rates unchanged,” Marcus said.

Balancing act
Marcus said rates were left alone because of the rand’s continued volatility and growing fears within the global economy.

In 2012 the rand depreciated by over 18% against the greenback and the euro—pushing up import costs.

“Global outlook remains low due to economic turmoil in the eurozone where it is predicted there will be a recession in 2012,” Marcus said.

She also confirmed that inflation is expected to remain out of SARB’s target band of 3% to 6% with this being exacerbated by subdued demand.

Gina Schoeman, senior economist at Absa capital described SARB’s statement as “hawkish”, with the bank having to monitor any reason to push up rates.

Volatility remains a concern
“Inflation risks have moved higher and even though growth has been revised, rand volatility remains a concern,” Schoeman told the Mail & Guardian.

SARB expects inflation to remain above target this year, with 6.6% being forecast in the second quarter of 2012.

Accordingly, South Africa’s growth forecast for 2012 has been marked down to 2.8% from 3.2% and drops to 3.8% from 4.2% in 2013.

Dawie Roodt, chief economist at the Efficient Group described the move on growth forecasts as “aggressive”.

“SARB believes we are in a little more trouble than figures suggest. I believe otherwise but the bank is just being cautious,” Roodt told the M&G.

Nickolaus Bauer

Nickolaus Bauer

Nickolaus Bauer is the Mail & Guardian's jack of all trades news reporter that chases down stories ranging from politics and sports to big business and social justice. Armed with an iPad, SLR camera, camcorder and dictaphone, he aims to fight ignorance and pessimism through written words, photographs and videos. He believes South Africa could be the greatest country in the world if only her citizens would give her a chance to flourish instead of dwell on the negativity. When he's not begging his sub-editors for an extra twenty minutes after deadline, he's also known to dabble in the occasional poignant column that will leave you mulling around in the depths of your psyche. The quintessential workaholic, you can also catch him doing sports on the weekday breakfast show on SAfm and presenting the SAfm Sports Special over the weekend. Read more from Nickolaus Bauer

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