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Will the Reserve Bank cut the repo rate?

Economists say there were several factors that were in favour of a drop in the repo rate.

SA Reserve Bank Governor Lesetja Kganyago. Picture: AFP.

JOHANNESBURG - Despite favourable inflation figures, some economists on Wednesday said it was unlikely the Reserve Bank would decrease the repo rate.

The bank has been reluctant to drop the rate in recent months.

Economists say there were several factors that were in favour of a drop in the repo rate.

These include inflation at the lower end of the 3% to 6% target range and a less volatile rand.

However, Standard Bank economist Goolam Ballim said there was one factor that appeared to be stopping a reduction in the rate.

“South Africa could experience a credit rating downgrade by Moody’s, which could trigger capital outflow.”

A recent Reuters poll of economists saw agreement that a ratings downgrade by Moody's would see a different overall picture.

Moody's is the only major ratings agency to have South Africa in investment grade.

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