Reserve Bank keeps Repo Rate unchanged; adjusts economic growth forecast

Reserve Bank Governor Lesetja Kganyago says one of the main reasons it was able to keep the Repo rate unchanged, was the fact that inflation remained within the target range of between 3 and 6% in August.

Statistics South Africa announced on Wednesday that CPI had dropped to 5,9% in August - down from 6% in July.

Kganyago also attributed the positive GDP figures of the second quarter - resulting in South Africa avoiding a technical recession after the economy contracted in the first quarter.

"Nevertheless, higher inflation outcomes are forecast in the near-term before a sustained return to within the target range during 2017," Kganyago said.

He added the shock waves felt by international markets due to the Brexit vote had now subsided.

Other factors such as fuel and food prices have also been factored in.

Kganyago said while the bank expects a moderate increase in Brent Crude prices, it predicts food prices to peak in the final quarter of 2016 - posing a major risk to inflation.

Kganyago said the Monetary Policy Committee remains concerned about inflation as it is still within the "upper end of the inflation target range."

The Reserve Bank also adjusted its forecast for economic growth for the year from 0% to 0,4%.

This was mainly due to the 3.3% economic growth recorded in the second quarter. But the adjustment is likely to change again.

"While the second quarter growth performance was more favourable, data for July suggest that this improvement is unlikely to be sustained in the third quarter," Kganyago explained

The Rand was trading at 13.4899 against the US Dollar after the Reserve Bank announcement.