LIVE: Rand cheers steady SA rates

50/50 split on rates call

SA Reserve Bank (SARB) governor Lesetja Kganyago said on Thursday that the bank's monetary policy committee (MPC) was split on whether to lower or keep rates stable before the decision was made to leave the interest rates unchanged.

“The MPC has decided to keep the repurchase rate unchanged at 6.75% per annum. Three members preferred an unchanged stance and three members preferred a 25 basis point reduction. Ultimately the committee decided to keep the rate unchanged,” he said. 

"Given the heightened uncertainties in the economy, the MPC felt it would be appropriate to maintain the current monetary policy stance at this stage."

Mixed reaction from property sector

Cape Town - The decision by the SA Reserve Bank's Monetary Policy Committee to keep the repo rate unchanged at 6.75% is very disappointing for the economy and property market, Samuel Seeff, chair of the Seeff Property Group reacted on Thursday.

That means the home loan base rate will remain at 10.25%. "At a time of poor business confidence and weak economic growth marred by political instability, a further rate cut would have been an important boost for consumers and the market," he said.

Andrew Golding, chief executive of the Pam Golding Property Group, agreed that SA's housing market would have benefited from an interest rate cut.

he reckoned that a further reduction would have reinforced a positive outlook, thereby helping boost increased activity and growth in the residential property market. “With about two thirds of South Africa’s citizens under the age of 35 years and many not yet home owners, first time buyers remain an important source of housing demand," said Golding.

“There’s no doubt that during times of intense economic and political uncertainty, investors often tend to favour ‘real’ assets like property."

Mike Greeff, CEO of Greeff Christies International Real Estate, on the other hand, welcomed the latest rates move as positive, "as it sends a strong message of stability to the market, and this is very important in the current economic climate".

Stay with us. More reaction and analysis to follow.

How the rand reacted on the rates announcement.

SARB Governor Lesetja Kganyago said given the heightened uncertainties in the economy, the MPC felt it would be appropriate to maintain the current monetary policy stance at this stage, and reassess the data and the balance of risks at the next meeting.

Rand cheers decision to keep rates steady at 6.75%, now trading at R13.26 to the US dollar from an intra-day low of R13.40.

Cape Town - Governor Lesetja Kganyago announced on Thursday that the South African Reserve Bank (SARB) has decided to keep the interest rate unchanged.

The repo rate - the interest rate at which the SARB lends money to commercial banks - now stands at 6.75%. The cost of borrowing stays at 10.25%.

The consensus was for a cut of at least 25 basis points.

The SARB has revised its longer term growth upwards and lowered the inflation outlook.

It now expects the SA economy to grow at 0.60% in 2017 and 1.20% in 2018, with inflation averaging 5.70% in 2017 and 5.80% in 2018.

The currency market little surprised, USDZAR trading at R13.30, says TreasuryOne.

The Monetary Policy Committee was split on the decision to keep rates on hold.

Core inflation has remained relatively stable, however a number of risks have increased.

The rand remains key upside risk to inflation outlook.

SARB expects output consumption growth to be about 1% this year.

Lower inflation and lower interest rates are expected to provide some support to consumers.

Growth in credit extension to private sector has declined steadily over past few months, with growth in credit extension to households remaining negative in real terms.

The SARB’s forecast for GDP growth for 2017 has been revised up marginally from 0.5% to 0.6%.

Kganyago views on the rand: The rand remains sensitive to political developments, weak economic growth prospects and the risk of further sovereign downgrades.

The local unit has been supported by demand for high yielding emerging markets bonds.

He cautions that lLonger term bond yields and the rand remain vulnerable to a sell-off if SA is further downgraded.

Kganyago: Global conditions remain generally favourable despite some geopolitical risks.   Hurricanes expected to have only limited impact on US growth.

Despite the improved growth outlook, global inflation pressures remain benign especially in advanced economies.

SARB governor Lesetja Kganyago on inflation: Food product prices moderated further; the  Bank's forecast for CPI inflation is unchanged; the local turning point is still expected in first quarter of 2018.

SARB governor Lesetja Kganyago starts briefing with an economic overview ahead of the MPC decision.

He says the SA economy recorded positive growth in Q2, but growth prospects remain subdued.

Cape Town - Weak economic growth, heightened political uncertainty and potential fiscal fallout make for a cautious move when the Reserve Bank's monetary policy committee (MPC) announces its decision on interest rates later this afternoon.

With the rand relatively strong, inflation heading lower and the economy in virtual stasis, economists believe the South African economy needs a boost with an interest rate cut of at least 25 basis points.

These are the facts:

Inflation is currently at <a href="http://www.fin24.com/Economy/just-in-petrol-price-hike-fuels-inflation-20170920">4.8%</a>; the rand is trading at R13.35/$ at 14:20 ahead of the rates announcement and the economy has lifted itself out of a recession with a <a href="http://www.fin24.com/Economy/gdp-back-in-positive-territory-with-25-growth-20170905">2.5% expansion</a> in the second quarter.

In July the SARB reduced its key rate to 6.75% from 7% in a <a href="http://www.fin24.com/Markets/Currencies/surprise-rate-cut-is-no-death-knell-for-resilient-rand-20170721">surprise move</a> to boost an economy in recession.

The rpime lending rate is currently at 10.25%.