Sarb: Risks too high for repo rate cut

Deputy Governor Kuben Naidoo believes that the key to kick-starting the economy is confidence.

The South African Reserve Bank. Picture: Supplied.

CAPE TOWN - The South African Reserve Bank (Sarb) has reiterated that although lower inflation leaves scope for a repo rate cut, the risks remain too high for such a move.

Deputy Governor Kuben Naidoo made the comment during Tuesday’s Monetary Policy Forum in Cape Town.

Possible further credit rating downgrades and the African National Congress’ elective conference are among the risk factors highlighted by the Sarb.

Naidoo says these are among the reasons why the central bank opted not to further reduce the repo rate last month despite a slower inflation rate.

He believes the key to kick-starting the economy is confidence.

“I think it’s Barry Summers who says, ‘business confidence is the cheapest form of stimulus.’”

Sarb’s economics team believes high levels of household debt are limiting economic growth because indebtedness limits the amount that consumers can spend. In a consumption-driven economy, if people aren't spending, the economy won’t grow.

(Edited by Shimoney Regter)