SARB leaves repo rate unchanged: Comment

Following the South African Reserve Bank’s decision earlier today to keep interest unchanged, FNB confirms that it will maintain its prime lending rate at 10,5% and will review its position after the next SARB MPC meeting in May.

Says FNB CEO Jacques Celliers: “With inflation still above 6% but now on a downward path, consumers are eagerly anticipating lower rates. However, the risk of price-shocks may still arise from negative commentary by ratings agencies in mid-2017 and Brexit. For these reasons, we urge consumers to build their budgets based on rates stability. While a rate cut will certainly lift consumer confidence, we should not begin ‘pricing-in’ lower rates until greater certainty emerges.”

“I am positive that 2017 will be a significantly better year provided we all make a determined and passionate effort to build market stability and normality in times of uncertainty. Our full attention should remain on averting a ratings downgrade in coming months,” says Mr Celliers.

“Drought-breaking rain in the summer rainfall areas uplifted many communities and we hope for relief in areas still affected by drought. We are now seeing early signs of the much-anticipated 2017 recovery in higher levels of banking activity. Yet, there are still many ways we can work to together to lift growth to a level where we can reduce unemployment and address poverty,” adds Mr Celliers.

Says Sizwe Nxedlana, Chief Economist at FNB: “While the MPC opted to keep rates unchanged today, the dovish tone of the statement certainly suggests that the bank is less worried about the inflation outlook than it has been in previous months. Downward revisions to the inflation forecast and the weak growth outlook signalled the end of the hiking cycle. However, the MPC will tread cautiously once again as it remains cognisant of policy tightening by the Federal Reserve and the possible upside risk to the rand and consequently inflation, should fed policy action become more aggressive than is currently assumed. Another concern will be the recent rise in political uncertainty surrounding the finance minister’s future and the potential impact that this can have on the rand and inflation. The recent political uncertainty and the associated rand weakness has reduced the odds of a rate cut later this year – for now,” adds Mr Nxedlana.



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