Rates stay unchanged but economic risks persist
Some analysts have said Reserve Bank Governor Lesetja Kganyago should in fact decrease the repo rate by 0.5 basis points to boost employment while others say the rate should hold while the country’s economy remains unstable.
“Moreover, South Africans have re-entered the jobs market as economic activity resumed. Household spending remains healthy in line with better-than-expected salaries and wages,” said Kganyago.He added that as a result of this, as well as rising asset prices and low interest rates, the domestic economy is expected to grow by an upwardly revised 5.3% this year – from 4.2% before Statistics SA’s GDP rebasing.
“With largely unchanged inflation expectations and even with continued upside risks, the committee expects inflation to stay close to the mid-point over the forecast period. Against this backdrop, the MPC decided to keep rates unchanged at 3.5% per annum. The decision was unanimous,” said the governor.
He said oil prices were also revised up for this year and that petrol price inflation is also higher at 16.1%, up from 15.3%. However, some economists have said these rising prices should not be of much concern because the inflation is transitory and will moderate in the coming months.
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