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Sarb holds home interest rates, forecasts 0% growth for 2016

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South African Reserve Bank’s (Sarb’s)?Monetary Policy Committee (MPC) has unanimously thought we would keep repo rate at 7% each year.

“Even though the committee remains focused on the entire inflation trajectory, the assessment on the balance of risks for the inflation outlook along with the weak domestic economy provides some room to obstruct further tightening of your monetary policy stance for the moment,” said?Sarb governor Lesetja Kganyago.

“The MPC is familiar with that a number of the favourable factors that led to this decision could reverse quickly, and stays all set to react appropriately towards the significant change in the inflation outlook,” he added.


Domestic growth has surprised further for the downside, along with the outlook remains constrained. Kganyago said the newest growth forecast for 2016 is 0% (0.6% previously). He explained Sarb doesn’t experience a growth contraction, however it’s still a risk.?Growth rates 1.1% (1.3%) forecast for 2017 and 1.5% (1.7%) for 2018.

“The domestic economic growth outlook remains extremely challenging, after the contraction in GDP inside first quarter for this year. Although anticipated to are actually the bottom reason for the cycle, the recovery is predicted for being weak,” said the governor.

At 23:55 the rand was trading at 14.2181 towards the dollar (0.79% stronger), 18.7633 to the pound (0.83% stronger), and 15.6685 into the euro (0.64% stronger).


  • Inflation: marginal improvement vs previous forecast, however seen accelerating further in 2016. Only likely to revisit within 3% to 6% target range in Q3 2017.
  • Inflation forecast: average 6.6% (6.7%) in 2016, 6% (6.2%) in 2017, 5.5% in 2018, marginally up.?2016 Q4 peak forecast down at 7.1% (7.3% before).
  • Downward inflation revisions due to some extent in order to reduce administered price inflation (mainly petrol), despite small upward adjustment in international oil price assumption.
  • Core inflation forecast: cheaper than previously. Seen moderating from 5.8% average in 2016 to 5.3% by 2018.
  • Food price inflation 11% in June?(11.3% peak in April), marginally negative month-on-month. Sarb’s?measure of core inflation?(excludes food, fuel and electricity) at 5.6% (5.5% before).
  • Risks on the inflation forecast assessed to keep to the upside, these risks have moderated somewhat
  • Rand has reversed losses, traded in 15.80-14.22 range vs dollar since last MPC?meeting. Appreciated against dollar, pound & euro
  • Rand appreciated by 11% versus?US dollar, by 12.9% vs?euro and 23% with the pound.?Rand has appreciated by 12.2% on trade-weighted basis, been maintained by global do a search for yield
  • PPI?for final manufactured goods declined from 7% in April to,5% in May
  • Average wage growth relatively stable, but hazards of increases much more than inflation and productivity gains
  • Post-Brexit: direct short-term influence on SA growth and trade gonna be fairly limited
  • Outlook for global economy more uncertain post-Brexit
  • IMF revised sub-Saharan African growth forecasts downward, suffering from lower commodity prices and severe drought some parts.
  • Inflation from the advanced economies remains low and yet generally below target
  • Net purchases of domestic bonds and equities by non-residents were R107.3 billion in June and July
  • China: recent developments indicate some improvement in growth prospects reacting to stimulus – has underpinned stabilisation and moderate upward trend in commodity prices.


Read the full MPC speech here.

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