Neelam Rahim | email@example.com
25 November 2023 | 16:14 CAT
While economists were divided on what the SA Reserve Bank may decide on the repo rate, Governor Lesetja Kganyago’s monetary policy committee, a short while ago, announced that the repo rate remains unchanged at 8.25%. It also revised its investment forecast for the year up to 7.7% in September.
The SARB kept its main interest rate unchanged in September, even with inflation well within its 3-6% target range, stressing deteriorating public finances risked fuelling price pressures.
Addressing a media briefing at the last MPC media briefing of the year, the bank’s Governor, Lesetja Kganyago, said the decision was unanimous.
“Electricity prices continue to present clear inflation risks, and with logistics constraints, are likely to have broader effects on the cost of doing business and living. Given uncertain fuel and food price inflation, considerable risk still attaches to average salary forecasts.
“Serious upside risks to the inflation outlook remain. In light of these risks, the Committee remains vigilant and stands ready to act should risks begin to materialise,” the Governor said.
Kganyago said the policy stance aims to anchor inflation expectations more firmly around the midpoint of the target band [of between 3 and 6%] and to increase confidence in attaining the inflation target sustainably over time.
In an interview, a Professor at the Wits Business School, Jannie Rossouw, told Radio Islam International that should inflation be contained, the Reserve Bank can have a longer wheel and keep interest rates down.
However, Rossouw argues that should they exceed inflation expectations, higher interest rates can be expected.
Meanwhile, the governor commented that the interest rate hikes have affected business and the economy.
Speaking on his opinion, Rossouw said the SARB had made the correct decision.
“Inflation expectations are still contained.” He added that higher interest rates would have been positive for people who save, those who have money in the bank, and those who live off the interest earned.”
Rossouw also pointed out the negatives of increased interest rates for borrowers with debt.
Listen to the full interview on The Daily Round-Up with ANiisa Essack.