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South African consumers were given a welcome breather yesterday when with the reserve bank deciding to keep interest rates on hold after its two-day Monetary Policy Committee (MPC) meeting.
The Bank's repo rate - the rate at which it lends to banks - holds steady at 9percent, and the prime overdraft rate remains at 12,5percent.
Reserve Bank Governor Tito Mboweni said the Bank's decision was mainly because of easing inflation pressures. It had initially predicted that CPIX consumer inflation would breach the upper end of the 3 to 6percent target range later this year, but the bank now expects it to peak at 5,6percent year-on-year in the second quarter.
"Since the MPC meeting in December, the outlook for inflation has on balance improved," said Mboweni.
The bank raised rates four times last year, citing rising inflationary pressure and high consumer spending.
Though Mboweni was comfortable with inflation, he was still concerned about the country's rampant consumer spending, which saw credit growth near record levels at more than 25percent year-on-year in December.
Mboweni said consumer spending continued to grow "robustly" with only tentative signs of abating, and warned that the bank was studying proposals to increase the reserve requirements of commercial banks in a bid to curb still high credit growth. - With Reuters