South Africa interest rate unchanged jan 2012

The Reserve Bank’s monetary policy committee (MPC) has kept rates unchanged, it announced at the end of its three-day meeting in Pretoria on Thursday.


The repo rate remains at 5,5% and the prime interest rate at 9%, said Gill Marcus, governor of the Bank.

SARB

This was the seventh consecutive meeting of the MPC where the repo rate remained unchanged, after it was reduced by 650 basis points between mid-2008 and December 2010. It keeps the rate at its lowest level in more than 30 years.


Economists had not expected the MPC to raise or lower rates, a decision that should not affect the rand.


Barclays Capital also said earlier on Thursday that the MPC announcement was unlikely to have a material impact on the rand in the near term if the decision was unchanged and the accompanying policy statement suggested that the possibility of an imminent shift in the policy stance remained remote.


Ms Marcus also said that South Africa’s growth forecast for this year had been revised down to 2,8% from 3,2%. For next year, the forecast is now 3,8% from 4,2%.


Inflation was steady at 6,1% last month, which confounded forecasts of an increase and eased speculation that the Bank would be forced to raise interest rates late this year.


Market consensus had predicted inflation would rise to 6,3% compared with December 2010, up from 6,1% in November and taking it further above its official 3%-6% target range. In December last year, inflation rose by 0,2%, below a 0,3% increase in November.


In November, the Bank predicted inflation would peak at an average 6,3% in the first quarter of this year before declining gradually and returning to the target range in the final quarter.


Many economists believe inflation will be higher and stay out of its target range for longer, prompting the Bank to raise interest rates later this year.


The rand depreciated by more than 18% against the dollar and the euro last year, which raised the cost of imports, particularly that of petrol.


So far this year the rand has strengthened, and may continue to do so over the coming months if global risk aversion abates.


With MARIAM ISA and I-NET BRIDGE, SAPA


Source : businessday.co.za
Tags : interest rate, new interest rate, Gill marcus, reserve bank