South Africa’s Reserve Bank has left its benchmark repo rate unchanged at 5,0%, balancing weakening economic growth against a deteriorating outlook for inflation.
The central bank has left rates unchanged at all its policy meetings this year except for July, when it decided on a surprise cut of 50 basis points.
ANALYST COMMENT
ANISHA ARORA, EMERGING MARKET ANALYST, 4CAST
“Governor Marcus highlighted far too many new and re-emerging risk factors that prevent a continuation of any rate easing, particularly a weak rand, which poses an upside risk to the inflation outlook and food prices.
“On the other hand, the mining strikes have left a very negative outlook for the manufacturing and mining sector, and as we have mentioned before, increasing unit labour costs could lead to job losses and worsening employment figures.
“Overall, it is a difficult balancing act for the MPC, but after all, their mandate is to maintain price stability and thus rates were kept on hold.”
KEVIN LINGS, CHIEF ECONOMIST, STANLIB
“It’s the right decision. Obviously the Reserve Bank is still concerned about downside risks to growth.
“Clearly food is a concern and there’s likely to be further pressure there and the rand is unpredictable.
“The Reserve Bank’s revised forecast is a little bit low, our number is slightly higher than that. There has to be some upside risk to inflation.”
“I think the Reserve Bank has got interest rates low enough already.”
PETER ATTARD MONTALTO, EMERGING MARKET ECONOMIST, NOMURA
“We still think they can cut in Q1 once growth shocks come through and there is a clearer picture of the negative impact on growth from global and domestic factors.
“Interesting change — they didn’t discuss a cut this time whereas they did last time.
“There is a view developing, it seems, of the FX moves having been more important. But I think she is talking more about non-core CPI pressures than core, and I don’t think it is being put as an argument for not cutting. I think simply the level of growth shock was not there to make the move.”
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Reserve Bank leaves rate unchanged
South Africa’s Reserve Bank has left its benchmark repo rate unchanged at 5,0%, balancing weakening economic growth against a deteriorating outlook for inflation.
The central bank has left rates unchanged at all its policy meetings this year except for July, when it decided on a surprise cut of 50 basis points.
ANALYST COMMENT
ANISHA ARORA, EMERGING MARKET ANALYST, 4CAST
“Governor Marcus highlighted far too many new and re-emerging risk factors that prevent a continuation of any rate easing, particularly a weak rand, which poses an upside risk to the inflation outlook and food prices.
“On the other hand, the mining strikes have left a very negative outlook for the manufacturing and mining sector, and as we have mentioned before, increasing unit labour costs could lead to job losses and worsening employment figures.
“Overall, it is a difficult balancing act for the MPC, but after all, their mandate is to maintain price stability and thus rates were kept on hold.”
KEVIN LINGS, CHIEF ECONOMIST, STANLIB
“It’s the right decision. Obviously the Reserve Bank is still concerned about downside risks to growth.
“Clearly food is a concern and there’s likely to be further pressure there and the rand is unpredictable.
“The Reserve Bank’s revised forecast is a little bit low, our number is slightly higher than that. There has to be some upside risk to inflation.”
“I think the Reserve Bank has got interest rates low enough already.”
PETER ATTARD MONTALTO, EMERGING MARKET ECONOMIST, NOMURA
“We still think they can cut in Q1 once growth shocks come through and there is a clearer picture of the negative impact on growth from global and domestic factors.
“Interesting change — they didn’t discuss a cut this time whereas they did last time.
“There is a view developing, it seems, of the FX moves having been more important. But I think she is talking more about non-core CPI pressures than core, and I don’t think it is being put as an argument for not cutting. I think simply the level of growth shock was not there to make the move.”
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