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The Reserve Bank keeps interest rates unchanged, for now

by , 23 September 2015

Earlier today, the South African Reserve Bank's monetary policy committee decided to keep interest rates unchanged for the moment.

This follows the US Federal Reserve's decision last week to keep its interest rates also on hold.

Let's take a closer look at the Reserve Bank's decision…

Interest rates remain unchanged as inflationary pressures ease

The governor of the Reserve Bank, Lesetja Kganyago, announced that the monetary policy committee is keeping interest rates as is for the time being, says Fin24. This means the repo rate remains at 6%.

But Mr Kganyago warned that if inflation looks likely to rise, the committee won’t “hesitate to act,” adds Fin24.

One of the major reasons behind the committee’s decision is the “weakening economy,” reports IOL. The bank’s forecasts economic growth for this year to come in at 1.5%. This is down from its previously stated 2%.

The South African economy looks likely to avoid recession

After a contraction in economic growth over the second quarter of the year, the governor doesn’t believe South Africa will enter a recession, notes BDLive. This goes hand in hand with Moody’s, which earlier today also stated a recession was unlikely.

One of the main concerns for the monetary policy committee at its last meeting in July was rising inflation, says MoneyWeb. But “lower oil prices” have helped ease that pressure.

Mr Kganyago did point out that the “global economic outlook has become more uncertain,” adds MoneyWeb. This is down to worries over an economic slowdown in China and with the Fed putting off a rate hike.

And the “rand remains a significant risk factor to the inflation outlook,” adds the SABC.

The governor said today’s decision by the committee aims to “achieve a fine balance between realising its core mandate [by inflation targeting] and not undermining short-term growth unduly, says iAfrica.

For consumers burdened with debt, the outcome is favourable. But if the rand depreciates further or other factors change, the monetary policy committee may change its mind next time it meets in two months’ time.

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The Reserve Bank keeps interest rates unchanged, for now
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