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Possible rating downgrades, struggling SOEs led to repo rate remaining unchanged

Reserve Bank Governor Lesetja Kganyago has announced the outcome of the MPC's meeting, saying while there are a number of concerns including political instability growth is expected to improve this year.

FILE: South African Reserve Bank governor Lesetja Kganyago. Picture: AFP.

JOHANNESBURG - Reserve Bank Governor Lesetja Kganyago says possible rating downgrades and struggling state-owned entities were taken into account when deciding to leave the repo rate unchanged at 6.75%.

Kganyago has announced the outcome of the Monetary Policy Committee's (MPC) meeting, saying while there are a number of concerns including political instability growth is expected to improve this year.

Kganyago says consumer spending is set to pick up this year with a few factors set to support this.

“Although consumers are likely to be adversely affected by possible further tax increases, expenditure is expected to be underpinned by lower inflation and positive real wage increases.”

He also says inflation is expected to stay within the target range of between 3 and 6%.

“Inflation is expected to reach a low point below the midpoint but is then expected to resume an upward trajectory and measure 5.5% in the final quarter of next year.”

Kganyago says the rand received a boost following the African National Congress (ANC) elective conference but the local currency remains vulnerable to the political situation.