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Johannesburg - The domestic growth outlook remains weak, warned the SA Reserve Bank said on Thursday after keeping the repo rate unchanged at 5.75%.
"While inflation is the primary focus of the committee, the MPC is mindful of the anaemic state of the domestic economy, rising unemployment and the downside risk to its growth forecast," Sarb governor Gill Marcus said, announcing the Monetary Policy Committee's decision.
Marcus said the MPC was still of the view that interest rates would normalise over time. She said domestic expenditure had "deteriorated further". Together with continued moderation in household consumption expenditure this was indicative of the lack of demand pressures in the economy.
This meant the prime lending rate would remain at 9.25%.
Marcus said the MPC remained concerned at excessive wage settlements and the effect these would have on the economy.
"The MPC remains concerned about the risks of a wage-price spiral, should settlements well in excess of inflation and productivity growth become the economy-wide norm," she said.
"Such developments could also undermine South Africa’s international competitiveness and delay the current account adjustment."
Marcus said the decision to keep the repo rate unchanged was not unanimous. One person voted for a 25 basis point increase and six voted for no change.
"Despite the 75 basis point increase so far this year, monetary policy remains accommodative, and will continue to be supportive of the domestic economy subject to achieving its primary inflation targeting objective," she said.
"Future decisions will, as always, be highly data dependent."
The committee increased the repo rate in July and January this year.
In January, the repo rate increased by 50 basis points to 5.5% and in July it increased by 25 basis points to 5.75%. In March and May the repo rate remained unchanged.
First National Bank said its prime lending rate would remain 9.25% until the next MPC meeting on November 20.
FNB CEO Jacques Celliers urged people to use the stable rates environment to reduce debt.
"The bank continues to forecast rates hikes over the medium term, and consumers should act with care and plan ahead," he said in a statement.
FNB chief economist Sizwe Nxedlana said the bank felt a "gradual normalisation" of interest rates would continue in 2015 and 2016.
He advised people to plan for higher interest rates over the medium term and to use the current low rate environment to decrease debt.
"The timing of rate hikes will be dependent on domestic growth considerations and the timing of rate normalisation in the US."
BetterBond CEO Shaun Rademeyer said the repayment on a 20-year home loan of R757 125 would remain R6 934 and the repayment on a home loan of R586 705 would stay R5 373.
He said the fact that there would be no increase on car instalments, credit card payments or other debt commitments, would bring some relief for consumers.
