Warning that political uncertainty, volatile rand is threatening economy

Lesetja Kganyago says the rand remains unstable and this may drive inflation.

Picture: Reinart Toerien/EWN.

JOHANNESBURG - Reserve Bank Governor Lesetja Kganyago says political uncertainty, a volatile rand and the continuing drought are major concerns for the country's economic outlook, but for now, rates will remain unchanged

Kganyago announced this afternoon that the repo rate would remain at seven percent but says this could change given the volatile rand and inflation.

The governor says the rand remains unstable and this may drive inflation.

He also says political instability is not helping the local currency.

However Kganyago says inflation is stabilising.

Added to this, he says the high oil price is also driving inflation.

Kganyago says the drought is also expected to continue for some time, affecting food prices.

He says the MPC will be watching the rand and other inflationary pressures very closely before its next rating decision.

The reserve bank governor says the MPC won't hesitate in hiking rates if the outlook deteriorates.

SUBSTANTIAL FUEL PRICE INCREASES EXPECTED IN JUNE

Kganyago has warned of substantial fuel price increases next month due to the unstable rand and rising oil prices.

He says a number of factors are affecting the local currency and fuel prices are a concern.

The governor says low oil prices had been helping the petrol price, but the scenario has changed.

SARB LEAVES REPO RATE UNCHANGED AT 7%

The prime lending rate, the figure charged by banks to customers, will remain at 10.5 percent.

This follows two rate hikes so far this year.

Kganyago says growth is still low but there are signs of a turnaround.

"The MPC felt that there is some room to pause in this tightening cycle and accordingly decided to keep the repurchasing rate unchanged for now at 7 percent per annum."

In January the bank hiked the repo rate by 50 basis points to 6.75 percent.

In March the bank increased the repo rate, which is the rate at which the Sarb lends money to banks, by 25 basis points to 7 percent.