Repo rate remains unchanged at 3.5%
The South African Reserve Bank says it has opted to keep the interest rates unchanged amid concerns of worsening economic outlook.
The decision comes despite several other cuts in previous months, including a 25 basis point cut in July, a 50 basis point cut in May, 100 basis point cuts in March and April and another 25 basis point cut in January.
Governor Lesetja Kganyago made the announcement after the monetary policy committee concluded its meeting on Thursday.
The repo rate remains at 3.5% and the prime lending rate at 7%.
“Against this backdrop, the MPC decided to keep rates unchanged at 3.5% per annum. Two members of the committee preferred a 25 basis point cut and three preferred to hold rates at the current level.
“The implied policy rate path of the Quarterly Projection Model indicates no further repo rate cuts in the near term, and two rate increases in the third and fourth quarters of 2021,” said Kganyago.
Kganyago: The MPC has decided to keep the interests rate unchanged at 3.5%, with effect from 18 September 2020.
— Jacaranda News (@JacaNews) September 17, 2020
Two members of the committee preferred a 25 basis point cut and three preferred to hold rates at the current level. #SARBMPCSEP20 pic.twitter.com/19Slj8KL6V
Kganyago admitted the eased lockdown regulations have helped boost the bottom line, but said the country is not quite out of the woods.
“The bank now forecasts a GDP contraction of 8.2% in 2020, compared to the 7.3% contraction forecast in July. The lower second quarter is followed by revised projections of a stronger expansion in the third and fourth quarters of 2020.
“However, getting back to pre-pandemic output levels will take time. With a sharp decline in investment, potential growth estimates have been lowered, resulting in a smaller output gap over the forecast period. GDP is expected to grow by 3.9% in 2021 and by 2.6% in 2022,” he added.
The next statement by the committee will be released in November.
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Repo rate remains unchanged at 3.5% by Nokukhanya Mntambo on Scribd
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