PRETORIA, July 20 (Reuters) – Below are comments from South African Reserve Bank Governor Lesetja Kganyago on Thursday as he announced the central bank’s latest decision on its benchmark repo rate.
“Given the improved inflation outlook and the deteriorated growth outlook, the MPC has decided to reduce the repurchase rate by 25 basis points with effect from 21 July 2017, to 6.75 percent per annum.”
“The forecast for 2017 has been adjusted down from 1.0 percent to 0.5 percent and the forecast for 2018 is down from 1.5 percent to 1.2 percent.
“Domestic growth prospects have deteriorated further following the surprise GDP contraction in the first quarter of 2017. The economy has now recorded two successive quarter of negative growth, and although a near-term improvement is expected, the outlook remains challenging.
“While positive growth is expected in the second quarter, the Bank’s annual growth forecasts have been revised down further.
“Policy uncertainty, a recent example being in the mining sector, is likely to constrain investment.”
“Since the previous meeting of the Monetary Policy Committee the inflation outlook has improved. Food price inflation has moderated faster than expected, domestic demand pressures remain subdued and international oil prices have declined.”
“Despite a degree of volatility, the rand exchange rate has been relatively resilient in the face of expected monetary policy tightening in some advanced economies, as well as domestic political risks and uncertainties. Risks to the inflation outlook still remain.
“The rand’s relative resilience had been underpinned by the generally positive sentiment towards emerging markets, as well as by sustained trade surpluses.
“The rand has also been affected by [changing ECB and US monetary policy expectations] as well as by domestic political developments, including concerns about a proposal to change the SARB’s monetary policy mandate.” (Reporting by Olivia Kumwenda-Mtambo and TJ Strydom; Editing by James Macharia)