Sarb to act swiftly on repo rate if outlook deteriorates

The reserve bank has further revised the country's growth outlook downwards from 1% to 0.5%, a decision brought on by the recession.

FILE: Reserve Bank Governor Lesetja Kganyago. Picture: Renart Toerien/EWN.

CAPE TOWN – Despite a decision to cut the repo rate, the Reserve Bank has warned it will not hesitate to reverse the decision, if the economic outlook deteriorates.

On Thursday, the central bank announced some much-needed, albeit slight, relief for indebted consumers, reducing the repo rate by 25 basis points to 6.75%.

The prime lending rate, which is the interest rate charged by banks, will drop from 10.5% to 10.25%.

While he may have agreed to cut the repo rate, but in making the announcement, Reserve Bank Governor Lesetja Kganyago stressed a number of concerns.

“Although the rand has been relatively resilient, it remains vulnerable to heightened political uncertainty, global monetary policy developments and possible further credit rating downgrades.”

In terms of the inflation outlook, the Monetary Policy Committee is concerned that in spite of a slowing inflation rate, it remains sticky at the top end of the target band.

The reserve bank has further revised the country's growth outlook downwards from 1% to 0.5%, a decision brought on by the recession.

Kganyago has warned that should the rand face further risk or the inflation outlook deteriorates, the bank will act swiftly to reverse its decision to cut the repo rate.

(Edited by Leeto M Khoza)