Interest rate cut may not happen in wake of Cabinet changes

The central bank expects inflation to move back within the target range of between 3 to 6% in the second quarter of next year.

Statistics generic. Picture: Freeimages.

CAPE TOWN - The rand's in free fall on the back of the Cabinet reshuffle and this could mean the interest rate may not be cut later this year as had been speculated.

In a late-night move on Thursday, President Jacob Zuma released a statement saying that he had decided to make changes to the National Executive in order to improve efficiency and effectiveness.

Governor Lesetja Kganyago announced the repo rate will remain unchanged at 7%, leaving the prime lending rate at 10.5%.

He says although economic growth remains weak, the bank has adjusted its forecast upwards to 1.2% for 2017.

“The MOPC is of the view that we have reached the end of the tightening cycle, however, the committee would like to see a more sustained improvement in the inflation outlook before changing rates.”

He says the inflation outlook has improved due to the appreciation of the rand in recent months.

“The risk of further and weakening overshadows the inflation outlook.”

The central bank expects inflation to move back within the target range of between three to six percent in the second quarter of next year.

(Edited by Shimoney Regter)