WATCH: SA Reserve Bank chops interest rates to 6.25%
JOHANNESBURG - South African Reserve Bank (Sarb) Governor Lesetja Kganyago announced today the bank's latest decision on interest rates following the three-day meeting of the monetary policy committee (MPC) which he chairs.
Kganyago announced that SA Reserve Bank would be reducing the repurchase rate by 25 basis points to 6.25% per annum
"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 balance of risks to the outlook, and will seek to look-through temporary price shocks. The implied path of policy rates over the forecast period generated by the Quarterly Projection Model indicated two repo rate cuts of 25 basis points each in the first and fourth quarters of 2020. This remains a broad policy guide which could change in either direction from meeting to meeting in response to new developments and changing data and risks."
"While the rand has benefited from improvements in global sentiment, high long term bond yields reflect concerns about domestic growth prospects," the Reserve Bank governor said.
Kganyago said that the forecast for core inflation for 2019 is unchanged at 4.2%, is 4.3% in 2020 (down from 4.5%) and 4.4% in 2021 (down from 4.6%). The Bank’s forecast for core inflation for 2022 is 4.5%.
Kganyago said that t
he forecast of GDP growth for 2019 is revised lower to 0.4% (from 0.5%).
"The forecasts for 2020 & 2021 have also decreased to 1.2% (from 1.4%) and 1.6% (from 1.7%), respectively, due to lower growth than previously expected in Q 3 & 4. The GDP forecast for 2022 is 1.9%," he said.
The decision by the Reserve Bank’s Monetary Policy Committee to cut the repo rate by 25 basis points to 6.25% (from 6.5%) reducing the mortgage rate to 9.75% (from 10%) is welcomed, but we need more, according to Samuel Seeff, chairman of the Seeff Property Group.
"The Reserve Bank’s stance has been too conservative over the last year at the expense of the economy and property market. Consequently, it missed at least two, possibly three opportunities to cut the rate given that inflation has remained well within the target range for most of last year while the currency remained reasonably stable, and in fact improved,
Ahead of the announcement, Investec's Annabel Bishop said, "Interest rates are expected to remain flat this quarter ahead of Moody’s country assessment on 27th March."
"The SARB is unlikely to cut interest rates to support growth while structural reforms remain outstanding, as the impact of rate cuts would be marginal. The SARB previously forecast GDP growth at 1.4% y/y this year, but will likely revise this to below 1%. While much of a Moody’s downgrade has been priced into SA’s financial indicators already (the next review is scheduled for 27th March) an elevation in borrowing costs is expected, as likely not all of the impact on bond yields and money market rates is priced in, particularly if a credit rating downgrade from Moody’s occurs during a period of risk-off in global financial markets,
" Bishop further said.
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