S.African c.bank defies expectations by keeping rates at 6.75 pct

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South African Reserve Bank governor Lesetja Kganyago listens during a briefing at Parliament in Cape Town, South Africa, August 1, 2017. REUTERS/Mike Hutchings

PRETORIA (Reuters) – South Africa’s central bank kept its benchmark repo rate at 6.75 percent on Thursday, defying expectations of a cut based on easing inflation pressures and a sluggish recovery from a recession in the first half of the year.

Of 26 economists polled by Reuters, 17 had predicted a 25 basis point cut and one a 50 basis point reduction. The remaining eight predicted a ‘hold’.

Governor Lesetja Kganyago admitted the decision was tight, with the six-member monetary policy committee split 3-3 on whether to hold or cut, leading to the maintenance of the status quo.

However, he said it was appropriate to maintain a “balanced” monetary policy stance, with inflation expectations in Africa’s most advanced economy anchored towards the top end of the bank’s 3-6 percent target band.

The rand reversed losses against the dollar after the decision, moving to 13.2775 by 1333 GMT. Bonds also gained, pushing yields on the benchmark 2026 bond up 9 basis points to 8.495 percent.

Analysts immediately turned their attention to the bank’s next interest rate meeting, in November, at which it is expected to ease policy to help pep up the struggling economy.

“While we expect the central bank to cut interest rates further, the time horizon in which the Bank can achieve this is relatively short given various macroeconomic risks ahead,” FNB chief economist Sizwe Nxedlana said.

“Inflation is also forecast to start lifting again from mid-2018 onwards which will constrain the possibility of further policy easing in the second half of next year.”

Reporting by Johannesburg bureau; Writing by Ed Cropley; Editing by Ed Stoddard

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Godwin Okafor is a financial journalist, Internet Social Entrepreneur and the Founder Naija247news Media Ltd He has over 16 experiences in journalism, which cuts across traditional and digital media. He started his journalism career in Business Day, Where he was a senior editorial graphic artist, before he left to start Naija247news, An Online Financial Newspaper in 2010. He has won series of awards and he is the chairman of Emmerich Resources Limited, the publisher of Naija247news.com and also sits on the board of Students In Business Awards, (SIBA).

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