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HIGHLIGHTS-South African central bank comments on rate decision
May 25, 2017 / 1:08 PM / 4 months ago

HIGHLIGHTS-South African central bank comments on rate decision

PRETORIA, May 25 (Reuters) - Below are comments from South African Reserve Bank Governor Lesetja Kganyago on Thursday as he announced the central bank’s latest decision on its benchmark repo rate. GROWTH ”The Bank’s forecast for GDP growth has been revised down for the entire forecast period, by 0.2 percentage points for 2017 and 2018, and by 0.3 percentage points in 2019. “Domestic economic growth prospects have deteriorated, as the impact of the ratings downgrades is expected to weigh on domestic investment and consumer sentiment ... However the trajectory of the growth forecast is still positive.” INFLATION “While the inflation outlook has improved over the near term, the longer term trajectory is unchanged and uncomfortably close to the upper end of the target range.”

RAND ”The rand exchange rate and domestic bond yields benefited from increased global capital flows to emerging markets which largely offset the impact of the sovereign credit ratings downgrade. “With further ratings decisions imminent, risks remain for a further depreciation against the backdrop of continued global and domestic political uncertainty.”

FOOD PRICES

“A continued moderation of food prices is expected over the medium term given the favourable agricultural outlook and the significant upward revisions to the maize crop estimates.”

WAGE INCREASES

“Nominal salary and wage increases have continued to show signs of significant moderation, but are still at levels that contribute to the persistence of inflation at higher levels.”

CURRENT ACCOUNT

“A moderately wider current account deficit is expected over the forecast period, due in part to a recent deterioration in the terms of trade.”

DECISION

”The MPC assesses the risks to the inflation outlook to be more or less balanced... The MPC has decided to keep the repurchase rate unchanged at 7.0 percent per annum.

”The MPC remains of the view that the current level of the repo rate is appropriate for now and that we are likely at the end of the tightening cycle.

“Five members preferred an unchanged stance while one member preferred a 25 basis point reduction.” (Reporting by Mfuneko Toyana and TJ Strydom; Editing by Ed Cropley)

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