Sarb keeps interest rate on hold

Interest rate remains unchanged at 6.5%.
Reserve Bank Governor Lesetja Kganyago. Image: Moneyweb

The Reserve Bank’s Monetary Policy Committee (MPC) unanimously decided to keep the main lending rate at 6.5%. The banks’ prime lending rate is thus 10%.

Reserve Bank Governor Lesetja Kganyago made the announcement on Thursday in the capital.

This is the Central Bank’s penultimate announcement for the year. It follows a 25-basis point cut in the July meeting.

It repeated calls for structural reforms to raise potential growth rate, saying weakness in many sectors of the economy remained a cause for concern. The following are highlights from Kganyago’s speech:


“The medium-term inflation outlook is largely unchanged.”

SARB’s Quarterly Projection Model (QPM) sees headline inflation averaging 4.2% in 2019 (down from 4.4%); 5.1% in 2020 (unchanged); and slightly up to 4.7% (from 4.6%) in 2021. Headline CPI inflation is expected to peak at 5.3% in Q1 2020 and settle at 4.5% in Q4 2021. The forecast for core inflation is lower at 4.3% in 2019 (down from 4.4%), unchanged at 4.7% in 2020 and slightly higher at 4.6% in 2021 (up from 4.5%).

The Bureau for Economic Research’s (BER’s) Q3 survey sees headline inflation down slightly for 2019 at 4.6% (from 4.8%); unchanged at 5% in 2020; and eased from 5.2% to 5.1% for 2021, reaching the lowest levels since 2007.


Global GDP is expected to slow to 3.2% in 2019 and rise to around 3.5% in 2020. “While global growth remains resilient, recent indicators on trade and manufacturing have deteriorated and a range of downside risks to growth remain.

“In the second quarter of this year, South Africa‘s GDP rebounded from the contraction experienced in the first quarter, but economic activity levels still remain weak. Based on recent short-term economic indicators for the mining and manufacturing sectors, the third quarter GDP outcome is expected to be muted.”


Since the July MPC, the rand has depreciated 4.6% against the US dollar, and by 3% against the euro.

Rand vs US dollar over 3 months

“The QPM assesses the rand to remain slightly undervalued. While the rand has benefited from improvements in global sentiment, investors remain concerned about domestic growth prospects and fiscal risks.”


Prior to the meeting, analysts generally predicted that rates would be kept steady. However there was a mixed reaction to the MPC’s decision.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) Economist Marique Kruger said the decision bodes well for struggling businesses in the metals and engineering (M&E) sector and provides certainty in making key decisions affecting individual cost curves. “The bank’s decision was expected, especially given the current state of the domestic economy, which is in dire need of any kind of boost to ignite business activity.”

Mike Greeff, CEO of Greeff Christies International Real Estate said the MPC’s decision signals that Sarb “is satisfied with the current economic status of the country and is happy to adopt a ‘wait and see’ attitude with regard to balancing the growth of the economy versus keeping inflation under control.

 “The committee’s decision to not meddle with South Africa’s economic status quo should be seen as good news for the real estate sector. There has been some promising growth in the market and while it has not matched the growth of previous years, it is still a positive indicator.”

Samuel Seeff, chairman of the Seeff Property Group found the decision “disappointing”, calling for bold action to stimulate the economy and property market. “We have only had one 25bps rate cut this year (in July) and it is simply not enough. There is ample support for a further rate cut. The second quarter GDP growth of 3.1% was better than expected and inflation, despite slightly up to 4,3% in August, remains fairly benign and well within the bank’s target range of 3%-6%.

“Simply put, a bold rate cut fuels economic activity as it makes it cheaper for businesses and consumers to borrow. The SA economy is struggling, and sentiment and lack of political confidence in the market remains worryingly low. A cut in the interest rate would assist, especially since business confidence is at its lowest point in 20 years.”

Similarly, Pam Golding CEO Dr Andrew Golding said while the decision is positive for stability, it’s unlikely to stimulate increased activity in property. “A further interest rate reduction, on the back of the previous cut in July this year, would have collectively provided incentive for favourable buyer decisions.

“What is needed right now is a meaningful confidence boost to offset the global and local macroeconomic and socio-political factors impacting on the market and jump-start the muted economy and create impetus in the property market.”


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According to Fin24, there is concern about the rising cost of fuel, water & electricity therefore rates remain unchanged. So, the poor performance of government causes our currency to weaken thereby causing fuel prices to rise. Poor management of water and electricity cause prices to rise dramatically increasing the risk of inflation. There is zero demand side inflation but there is massive unemployment and a moribund economy. The USA has just cut rates to stimulate the economy but we see no cause to do so. Totally wrong decision in my opinion.

Correct. There is very little point in punishing companies and consumers for things they absolutely cannot control.

If SARB decrease interest rates further the currency will decrease in value (weaken) further. Enonomics 101. Low interest rates causes inflation and you end up stimulating asset value growth. I think this country can ill afford further increases in electricity/petrol price increases because of a weaker currency. The poor in the country are the people that suffers the most as they generally don’t own a car or a house. Decreased interest rates only favors those with a debt requirement. The poor needs more disposable income for the economy to grow not less. SARB has a big problem because politicians don’t understand this, that is why the currency is sitting at R15. Interest rates should be alot higher to protect the currency not lower.

This MPC is very disappointing to say the least

Cut the interest rate and you devalue the Rand resulting in the increase of imports. On the other hand what about people that have to live on the interest they receive on their savings, are they just regarded as worthless no good for nothings.

End of comments.





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