Sarb cuts growth forecast, keeps repo rate at 7%

The bank says that the decision by two ratings agencies to drop our rating to junk status has had a big impact on their forecasts.

FILE: Reserve Bank governor Lesetja Kganyago. Picture: EWN.

JOHANNESBURG – The Reserve Bank says while it's keeping interest rates on hold it has had to cut its growth forecasts for the economy following the reshuffle and President Jacob Zuma's removal of Pravin Gordhan as Finance minister.

The bank now expects our economy to grow by only one percent this year.

It also says that the decision by two ratings agencies - Standard & Poor's and Fitch - to drop our rating to junk status has had a big impact on their forecasts.

Reserve Bank Governor Lesetja Kganyago says the rand could still play a major role in whether inflation will go up again.

“The outlook for the rand, and therefore the risk for inflation outlook, will be highly sensitive unfolding domestic political uncertainty as well as decisions by credit rating agencies.”

The bank kept the the repo rate, which is the rate at which the central bank lends money to banks, on hold at 7%.

The prime lending rate, which is the interest charged by banks to clients, will stay fixed at 10.5%.