Repo rate remains unchanged at 12%
Posted 14th August 2008 at 05:33 PM by NewsTracker
By Luyanda Makapela
Pretoria – Indebted South Africans can temporarily breathe a sigh of relief with the announcement that the repo rate will remain unchanged.
The South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) decided to keep the interest rate unchanged at 12 percent following its two-day meeting.
Addressing reporters on Thursday, Reserve Bank Governor Tito Mboweni said: “The MPC has considered the recent economic developments and the outlook for inflation and has concluded that the repurchase rate will, for now, remain unchanged at 12 percent per annum.”
Mr Mboweni said although the outlook for inflation remained uncertain with food and oil prices continuing to cloud the inflation outlook, there were tentative signs that these pressures may be moderating.
“While there are clear signs that the economy is responding to the less accommodative monetary policy stance, the MPC had to assess whether recent monetary policy actions are sufficient to bring inflation back to within the inflation target range over medium term,” the governor said.
With regards to the outlook on inflation, Mr Mboweni said the central forecast of the bank has been complicated by the impending rebasing and re-weighting of the Consumer Price Index (CPI) basket, to be implemented by Statistics South African in January 2009.
“In trying to account for these changes, certain assumptions have to be made, and the central forecast is therefore additional uncertainty,” he added.
The central focus generated on the above basis indicated that a near-term deterioration of the inflation outlook when compared to the previous forecast.
“CPIX inflation is expected to peak at an average rate of around 13 percent in the third quarter of 2008, compared to 12 percent.
“This means that the inflation is expected to decline significantly in the first quarter of 2009, partly as a result of the re-weighting and re-basing effects,” Mr Mboweni said.
He said the inflation is expected to average about 7.2 percent in 2009 and 5.9 percent in 2010.
The forecast takes into account the additional electricity price increases by Eskom in June.
With regards to oil prices, the governor said: “If the current oil price and exchange rate levels are maintained, a further sizeable decline can be expected in September.”
However, he said it is still too early to tell if the lower international oil price was a temporary phenomenon.
Business Unit South Africa (BUSA) has welcomed the decision by the Reserve Bank to leave interest rates unchanged, calling it appropriate and necessary in the changing economic circumstances since the MPC met two months ago.
“It is a positive development for business and consumer confidence.
“Although the short-term inflation trends suggest that inflation will get worse before it gets better, recent economic evidence indicates the medium-term inflation…has improved considerably,” said BUSA in a statement.
AGM Mapsure Risk Management Consultant (Pty) Financial Adviser Dawie Roodt shared the same sentiments, saying that this was a positive step by the bank.
“The repo rate was expected to remain the same due to factors like oil and food showing some relief.
“Fuel on the other hand is coming down which we believe that it will play a major role in reducing the effects of inflation,” said Mr Roodt.
He said there was still a need to engage people on Consumer Education Programme in alerting them of the effects of using credit cards.
“People still need to be educated about using credit cards, as credit contributes to the inflation rate. Banks, on the other hand, lure people into using credit cards and increase their debt, which leads to consumers going deeper in debt,” said Mr Roodt.
Nedbank Chief Economist Dennis Dykes said he had expected the repo rate to remain unchanged at 12 percent.
He said the SARB was concerned with inflation expectations and there was still a need for change.
With regards to food and oil prices, Mr Dykes said further relief was expected as the petrol price was also expected to go down by nearly R1 in the next month. - BuaNews
Pretoria – Indebted South Africans can temporarily breathe a sigh of relief with the announcement that the repo rate will remain unchanged.
The South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) decided to keep the interest rate unchanged at 12 percent following its two-day meeting.
Addressing reporters on Thursday, Reserve Bank Governor Tito Mboweni said: “The MPC has considered the recent economic developments and the outlook for inflation and has concluded that the repurchase rate will, for now, remain unchanged at 12 percent per annum.”
Mr Mboweni said although the outlook for inflation remained uncertain with food and oil prices continuing to cloud the inflation outlook, there were tentative signs that these pressures may be moderating.
“While there are clear signs that the economy is responding to the less accommodative monetary policy stance, the MPC had to assess whether recent monetary policy actions are sufficient to bring inflation back to within the inflation target range over medium term,” the governor said.
With regards to the outlook on inflation, Mr Mboweni said the central forecast of the bank has been complicated by the impending rebasing and re-weighting of the Consumer Price Index (CPI) basket, to be implemented by Statistics South African in January 2009.
“In trying to account for these changes, certain assumptions have to be made, and the central forecast is therefore additional uncertainty,” he added.
The central focus generated on the above basis indicated that a near-term deterioration of the inflation outlook when compared to the previous forecast.
“CPIX inflation is expected to peak at an average rate of around 13 percent in the third quarter of 2008, compared to 12 percent.
“This means that the inflation is expected to decline significantly in the first quarter of 2009, partly as a result of the re-weighting and re-basing effects,” Mr Mboweni said.
He said the inflation is expected to average about 7.2 percent in 2009 and 5.9 percent in 2010.
The forecast takes into account the additional electricity price increases by Eskom in June.
With regards to oil prices, the governor said: “If the current oil price and exchange rate levels are maintained, a further sizeable decline can be expected in September.”
However, he said it is still too early to tell if the lower international oil price was a temporary phenomenon.
Business Unit South Africa (BUSA) has welcomed the decision by the Reserve Bank to leave interest rates unchanged, calling it appropriate and necessary in the changing economic circumstances since the MPC met two months ago.
“It is a positive development for business and consumer confidence.
“Although the short-term inflation trends suggest that inflation will get worse before it gets better, recent economic evidence indicates the medium-term inflation…has improved considerably,” said BUSA in a statement.
AGM Mapsure Risk Management Consultant (Pty) Financial Adviser Dawie Roodt shared the same sentiments, saying that this was a positive step by the bank.
“The repo rate was expected to remain the same due to factors like oil and food showing some relief.
“Fuel on the other hand is coming down which we believe that it will play a major role in reducing the effects of inflation,” said Mr Roodt.
He said there was still a need to engage people on Consumer Education Programme in alerting them of the effects of using credit cards.
“People still need to be educated about using credit cards, as credit contributes to the inflation rate. Banks, on the other hand, lure people into using credit cards and increase their debt, which leads to consumers going deeper in debt,” said Mr Roodt.
Nedbank Chief Economist Dennis Dykes said he had expected the repo rate to remain unchanged at 12 percent.
He said the SARB was concerned with inflation expectations and there was still a need for change.
With regards to food and oil prices, Mr Dykes said further relief was expected as the petrol price was also expected to go down by nearly R1 in the next month. - BuaNews
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