Reserve Bank set to hold repo rate steady on Thursday
Economists predict South Africa’s interest rates will remain unchanged.
The Reserve Bank’s Monetary Policy Committee (MPC) will announce on Thursday which direction monetary policy will follow.
The central bank gave plenty breathing space in months gone by, making several cuts to the interest rates.
In September the bank kept rates unchanged.
Econometrix chief economist Azar Jammine says Thursday’s decision is likely to be the same.
“My expectations are that the Reserve Bank will leave the interest rates unchanged. Although inflation is coming lower than anticipated and the rand has been very firm of late, the Reserve Bank cannot rely on the rand to remain as firm as it is right now.
“Already there is a fairly significant chance that South Africa’s credit rating may be downgraded further and deeper into junk status on Friday so the risk is that if he reduces interests rate now, we won’t be able to attract as much capital as we did before to try and keep inflation low,” Jammine adds.
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Efficient Group economist Dawie Roodt shares Jammine’s sentiments.
“The Reserve Bank thinks, and I again I concur, that the monetary policy has done what it can to support the South African economy, what we need now are more structural adjustments,” says Roodt.
“It’s very, very unlikely that the Reserve Bank will increase the interest rates. Before the Reserve Bank starts increasing interest rates, they usually prepare the market for that.”
The repo rate stands at 3,5% while the prime lending rate is 7%.
