'Decision to keep interest rates unchanged not to say that Sarb is done cutting'
South Africa's 50-year low interest rates remain unchanged, the South African Reserve Bank (Sarb) announced on Thursday.
The repo rate stays at 3.5% and the prime rate at 7%.
Sarb Governor Lesetja Kganyago said growth has been revised to a contraction of 8% for this year from the 8.2% forecast in September.
The easing of lockdown restrictions has supported economic growth, with high-frequency indicators continuing to show a pickup in economic activity during Aug and Sept. Growth in 2020Q3 is expected to be 50.3% q/q saar. Annual growth is revised to -8.0% from 8.2% in Sept. pic.twitter.com/If1knuNjyR— SA Reserve Bank (@SAReserveBank) November 19, 2020
Bruce Whitfield interviews Ettiene Le Roux, chief economist at Rand Merchant Bank (RMB).
Kganyago gave a good explanation of why they're slightly less pessimistic about the growth forecast for 2020, says le Roux.
It's got to do with that they think is going to be a very strong bounce back when you think about the economy in the third quarter and that's certainly helping for 2020.Ettiene le Roux, Chief economist - Rand Merchant Bank
You then have a little bit of a dilemma to the extent that you will probably be forced to reduce your growth forecast for next year, and that's exactly what they did - but it was small.Ettiene le Roux, Chief economist - Rand Merchant Bank
They thought the economy would bounce back to 3.9% in 2021 and now it will be about 3.5%.Ettiene le Roux, Chief economist - Rand Merchant Bank
Le Roux notes that capital flows are returning not only to emerging markets but also to South Africa, which has helped the rand to strengthen.
These things factor into their forecast about growth and inflation... May it long last because the thing that we don't want is for the currency to weaken dramatically... or something untoward happens globally and suddenly we have to become more pessimistic about growth.Ettiene le Roux, Chief economist - Rand Merchant Bank
Things are relatively finely balanced globally as well as locally. The governor particularly warned us about that.Ettiene le Roux, Chief economist - Rand Merchant Bank
Is there still room for rate cuts in this cycle? Whitfield asks.
I think today's decision is not to say the Sarb is done cutting... For the time being I think it is steady as it is.Ettiene le Roux, Chief economist - Rand Merchant Bank
For more detail, listen to the interview with le Roux below:
Source : @SAReserveBank/Twitter