“Given the increased upside risks to the outlook, we do not see room for further monetary accommodation. We will continue to monitor developments carefully on an ongoing basis and remain committed to act as required. The MPC has decided to keep the repurchase rate unchanged at five per cent per annum at this stage,” said Marcus.
“The domestic growth outlook remains fragile, with third quarter growth expected to have been adversely affected by the protracted work stoppages in the motor vehicle sector in particular. Both business and consumer confidence remain at low levels. 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.”
Marcus also indicated that there would be a slight drop in the bank’s growth forecast for 2013 from two per cent to 1.9 per cent as well as the growth forecasts for 2014 and 2015.
“The forecasts for 2014 and 2015 have been revised down to three per cent and 3.4 per cent respectively, from 3.3 per cent and 3.6 per cent. This is consistent with the Bank’s composite leading business cycle indicator which continues to trend sideways,” she said.
“The RMB/BER business confidence index at 43 points was more or less unchanged in the fourth quarter, indicative of a subdued outlook.”
South African financial institution First National Bank (FNB) said that it would maintain its prime lending rate at 8.5 per cent following the decision to keep rates on hold until the next South African Reserve Bank (SARB) Monetary Policy Committee meeting.
“The SARB’s decision to leave the repo rate unchanged is unsurprising given the difficult trade-off that it currently faces. The growth outlook remains subdued, while a weak and vulnerable rand poses risks to inflation,” said FNB’s chief economist Sizwe Nxedlana.
“The careful balance needed to support growth and control inflation suggests that we may expect the repo rate to remain unchanged through 2014. I would encourage consumers to use the current low interest rate environment to pay down debt before rates begin to rise again.”