Lesetja Kganyago (pictured), South African Reserve Bank (Sarb) governor, has announced that there will be no change in the interest rate. Thus, the repo rate will remains at 7%, while the cost of borrowing will stay at 10.5%. A statement of the Monetary Policy Committee (MPC), issued by Kganyago, said that although headline CIP inflation has moderated since February, the respite is expected to be temporary, as petrol and food price pressures continue to intensify. The statement said:
"The recovery in the rand exchange rate in April also proved to be short-lived, as both domestic and external factors weighed on the currency. At the same time, domestic economic growth continues to disappoint. While there are signs that the economy may be reaching the low point in the growth cycle, the recovery is expected to be slow with downside risks. Global economic growth and financial market conditions have stabilised somewhat since the previous MPC meeting, but a high degree of risk and uncertainty persists."
In closing, the statement said that the MPC remains focused on its inflation mandate but "sensitive to the extent possible to the state of the economy". The MPC will not hesitate to act appropriately should the inflation dynamics require a response, within a flexible inflation targeting framework, it added, and future moves, as before, will remain highly data dependent.
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