South African Reserve Bank (Sarb) Governor Lesetja Kganyago has announced that the repo rate will remain unchanged at 6.75%. The repo rate is the rate at which the central bank lends money to commercial banks. The prime lending rate, which is the interest charged by banks to clients, will remain at 10.25%.
Kganyago says core inflation remains looks set to improve due to a better inflation rate – with growth also expected to improve to 0.9%. The Sarb governer says possible rating downgrades and struggling state-owned entities were taken into account.
Kganyago says consumer spending is set to pick up this year with a few factors influencing this. “Although consumers will be adversely affected by possible tax increases, expenditure is expected to be underpinned by lower inflation and Positive real wage increases.”
He also says inflation is expected to stay within the target range of between 3-6%.
“Inflation is expected to reach a low point below the midpoint, but it’s then expected to resume an upward trajectory and measure 5.5% in the final quarter of next year.”
Kganyago said the Rand received a boost following the ANC’s national conference, but the local currency remains vulnerable to the political situation.