The South African Reserve Bank’s monetary policy committee (MPC) has left the interest rate unchanged at 5.75 per cent.
“Inflation is now expected to average 4.9 per cent in 2015, with a first quarter low of 4.1 per cent,” Governor Lesetja Kganyago said.
The MPC noted concern over a weak rand and deteriorating inflation outlook on higher oil prices.
“Growth remains fragile, constrained by electricity shortages and low business confidence and the risk to the outlook remain on the downside.”
ABSA economist Jacques du Toit reiterated the MPC’s concerned about trends such as economic growth that is constrained by severe electricity shortages, low levels of consumer and business confidence and the deteriorating inflation picture.
“Although the repo rate, and thus banks’ lending rates, remain unchanged for now, the MPC is of the view that the unchanged stance regarding interest rates will not be maintained indefinitely. The forecast is, however, that interest rates will be hiked later in the year. Currently there is no changed impact on consumers, whose financial positions are affected by rising inflation, relatively low real income growth and low savings. Banks will continue to monitor economic and consumer-related trends in decisions regarding risk appetite and lending criteria, which affect the accessibility and cost of credit,” du Toit said.