South Africa - Pretoria - 28 March 2019 - South African Reserve Bank governor, Lesetja Kganyago announce the decision of the bank's Monetary Police Committee. Picture: Thobile Mathonsi/African News Agency(ANA)
JOHANNESBURG - South African Reserve Bank (Sarb) Governor Lesetja Kganyago announced today the bank's latest decision on interest rates after a three-day meeting of the monetary policy committee (MPC) he chairs.

Ahead of the meeting, many economists from the financial world predicted that South Africa's central bank was likely to keep its benchmark repo rate unchanged. 

Kganyago announced that the MPC decided to keep the interest unchanged at 6.75%. 

Kganyago said, "T he main drivers of the forecast are a lower starting point for food and services inflation, and the revised oil price assumptions. Food price inflation is now expected to average 3.7% in 2019.(down from 4.1%) "

The MPC decided to keep the repurchase rate unchanged at 6.75% per year. pic.twitter.com/uhaswCa1it

— SA Reserve Bank (@SAReserveBank) May 23, 2019

The MPC assesses the risks to the growth forecast to be on the downside - @KganyagoLesetja pic.twitter.com/tGnbOsDmU6

— SA Reserve Bank (@SAReserveBank) May 23, 2019

Headline inflation is expected to average 4.5% in 2019 (down from 4.8%), increasing to 5.1% in 2020 (down from 5.3%) and moderating to 4.6% in 2021 (down from 4.7%). pic.twitter.com/SGjH0tHNuW

— SA Reserve Bank (@SAReserveBank) May 23, 2019

In March, the SARB's monetary policy committee unanimously decided to keep the repo rate at which it lends to commercial banks unchanged as it cut its economic growth forecast. The MPC however warned of inflationary pressure in the months ahead stemming from increases in electricity tariffs, fuel prices and the rand exchange rate.

Investec economist Kamilla Kaplan said the effect of higher energy price inflation, reflecting the R1.31 per litre and 82 cents per litre increases in petrol and diesel prices respectively, would likely be partially countered by contained food price growth.

The MPC also revised down the country's GDP growth, saying it was now expected to average 1.0 percent down from 1.3 percent forecast in March.

Kganyago said three members preferred to keep rates on hold and two members preferred a cut of 25 basis points.

Kganyago said headline inflation was expected to average 4.5 percent in 2019, down from 4.8 percent, increasing to 5.1 percent in 2020 and moderating to 4.6 percent in 2021.

He said the main drivers of the forecast are a lower starting point for food and services inflation, and the revised oil price assumptions. Food price inflation is now expected to average 3.7 percent in 2019, down from 4.1 percent.

"The near term growth outlook is limited by the larger than expected slowdown in the first quarter, weak business and consumer confidence as well as growing pressure on household disposable income," Kganyago said.

"The Committee assesses the stance of monetary policy to be broadly accommodative over the forecast period. Any future policy adjustments will continue to be data dependent."

Kganyago also said weak business confidence, possible electricity supply constraints and high debt levels in certain state-owned enterprises will continue to limit investment prospects. 

Global GDP is expected to average 3.3% in 2019 and stabilise around 3.5% from 2020 - @KganyagoLesetja pic.twitter.com/SSzym6c7ir

— SA Reserve Bank (@SAReserveBank) May 23, 2019

Based on recent short term indicators and negative growth in mining and manufacturing, GDP is expected to contract in the first quarter of 2019. pic.twitter.com/MZ3L5rtngQ

— SA Reserve Bank (@SAReserveBank) May 23, 2019

The SARB now expects GDP growth for 2019 to average 1.0% (down from 1.3% in March).

— SA Reserve Bank (@SAReserveBank) May 23, 2019


WATCH the Reserve Bank Governor Lesetja Kganyago make the announcement below: 

[TUNE IN] Governor @lesetjakganyago is this afternoon delivering the MPC statement, watch it live on Facebook, here: https://t.co/K5Ns5Btc19 or YouTube, here: https://t.co/1lnBY1S4FC

— SA Reserve Bank (@SAReserveBank) May 23, 2019


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