The repurchase rate will remain unchanged at 6.75% per annum, Reserve Bank Governor Lesetja Kganyago has announced.
“In light of the recent developments and the balance of risks, the MPC [Monetary Policy Committee] has decided that it would be appropriate to maintain the current monetary policy stance at this stage,” the Governor said on Thursday at the announcement of the decision of the Monetary Policy Committee.
Five members of the MPC members preferred an unchanged stance, while one member preferred a 25 basis point reduction.
Kganyago said in recent weeks, some of the risks to the inflation outlook have dissipated somewhat.
“The rand appreciated following the African National Congress (ANC) elective conference. Also, Eskom was granted a lower-than-expected tariff increase. While S&P Global Ratings downgraded South Africa’s long-term local currency sovereign credit rating to sub-investment grade, Moody’s Investors Service (Moody’s) placed the country ratings on review for a downgrade.
“A further downgrade therefore remains a risk, and will depend on government’s response to the deteriorating fiscal position and commitment to credible growth-enhancing policies,” said the Governor.
He said against this more positive backdrop, the inflation forecast has improved despite continued increases in international oil prices.
“Near-term inflation is expected to remain close to the midpoint of the target range. At the same time, domestic growth outcomes have surprised on the upside, in large part due to the recovery in the agricultural sector.
“While there have been moderate upward revisions to the growth forecast, the outlook remains challenging,” he said.
The core inflation forecast remains unchanged at 4.8% for 2017 but has been adjusted down to 4.6% and 5.1% in 2018 and 2019 from 5.1% and 5.3% respectively.