SA interest rates to remain unchanged

CAPE Town — Interest rates will remain unchanged at 5.5 percent, South African Reserve Bank (Sarb) governor Gill Marcus announced yesterday. This implies that banks will also keep their prime lending rate the same, giving South Africa’s cash-strapped and highly-indebted consumers a welcome reprieve.

The decision was made after the monetary policy committee’s (MPC’s) third meeting for the year.
“The committee decided to keep the repurchase rate unchanged at 5.5 percent annum at this stage”, said Marcus.

The repo rate is the interest rate at which the Sarb lends money to commercial banks.
Marcus, who last hiked the repo rate in January, suggested at the time that further increases were on the cards.
She elaborated on this yesterday.

“The committee continues to hold the view that we are in a rising interest rate cycle, and interest rates will have to be normalised in due course. We embarked on this process with our first move in January 2014.
“The MPC reiterates that a rising interest rate cycle does not mean that rates will be raised at each meeting, or by the same amount each time.”

Marcus said that the Sarb also revised down the 2014 economic growth forecast.
“The bank’s economic growth forecast for 2014 has been revised down significantly to 2.1 percent, and the first quarter growth outcome is anticipated to be the lowest quarterly growth rate since the recession in 2009.”

She also added that the mining labour unrest is a concern.
“The risks to the 2014 growth forecast are strongly on the downside, with developments in the mining sector an ongoing cause for concern”, she cautioned.

Marcus also warned that the demand side of the economy is weakening.
“Household consumption expenditure growth continues to moderate amid slower credit extension to households, high levels of consumer debt levels and moderate job growth”.

She said the domestic price of petrol has benefited from the stronger trend in the exchange rate over the past weeks.
The international oil price has remained within the range of $105-$111 for some time. “Should current trends continue, a further reduction can be expected in June”.

The energy department announced a petrol price decrease in May of 15.0 cents a litre (c/l) in Gauteng. — Fin24.