Share

Marcus: Rates hike not appropriate

Johannesburg - The SA Reserve Bank governor Gill Marcus said it is not the time to raise interest rates because of supply disruptions and low business and consumer confidence.

She announced on Thursday that the repo rate will remain unchanged at 5%.

It was important to recognise that the economic climate was extremely difficult, and that the environment was not getting better and was prone to risk, she said.

She said the Monetary Policy Committee (MPC) had discussed raising rates, the circumstances which would warrant a rate hike and the implications thereof, but had agreed a hike would not be appropriate.

"The committee assesses the risks to be on the downside, amid continued supply disruptions and low business and consumer confidence," said Marcus.

"The downward trend of household consumption expenditure is indicative of relatively weak demand conditions in the economy, and slower bank credit extension to households is likely to reinforce this trend."

Marcus said that since the previous MPC meeting, the headline inflation rate had returned to within the inflation target range.

Despite this development, inflation was expected to remain "uncomfortably close to the upper end of the target band".

The upside risks to the inflation outlook remain elevated, said Marcus.

Strikes in the auto industry had affected third quarter growth and the domestic growth outlook remained fragile, said Marcus.

"Both business and consumer confidence remain at low levels," she said.

"The MPC therefore continues to face the dilemma of upside risks to inflation against a backdrop of a weaker growth outlook and a possible further depreciation of the currency."

The year-on-year inflation rate as measured by the consumer price index (CPI) for all urban areas declined to six percent in September and 5.5% in October.

Petrol prices increased at a year-on-year rate of 9.3% in October, down from 12.8% in September.

Core inflation, which excludes food, petrol and electricity, was unchanged at 5.3%, while administered price inflation excluding petrol increased marginally to 7.1%.

The headline producer price inflation for final manufactured goods was unchanged in September at 6.7%.

Marcus said the bank's headline inflation was more or less unchanged since the previous MPC meeting in September.

"The inflation forecast remains uncomfortably close to the upper level of the inflation target range, but our central forecast remains within the target," she said.

"Given the increased upside risks to the outlook, we do not see room for further monetary accommodation. The MPC has decided to keep the repurchase rate unchanged at five percent per annum at this stage."

Marcus said the bank's MPC would carefully watch developments on an ongoing basis.

"The forecast average inflation rates for 2013 and 2014 are 5.8% and 5.7% respectively, both years 0.1 percentage point lower than in the previous forecast," said Marcus.

"The forecast for 2015 is unchanged at 5.4%, with inflation expected to average 5.3% in the final quarter of that year."

Marcus said inflation was expected to remain within the target range for the entire forecast period.

The exchange rate of the rand remained an increasingly upside risk to the inflation outlook, Marcus said.

Marcus said should international oil prices and the exchange rate remain at current levels, a small increase in the domestic petrol price was likely in December.


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.90
+0.2%
Rand - Pound
23.86
+0.2%
Rand - Euro
20.36
+0.3%
Rand - Aus dollar
12.31
+0.3%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders