Interest rates unchanged for 5th time: Expect fewer cuts, later, says economist

Bruce Whitfield discusses the MPC statement with Isaah Mhlanga, Head of Markets Research at Rand Merchant Bank.

The SA Reserve Bank (Sarb) has announced that the interest rate will remain unchanged, for the fifth time in a row.

The decision by the Monetary Policy Committee (MPC) comes after last week's announcement that consumer price inflation had risen to a four-month high in February.

RELATED: Inflation climbs to four-month high as interest rate decision looms

Delivering the MPC statement, Governor Lesetja Kganyago said the repo rate will remain at 8.25%.

This means the prime lending rate stays at 11.75%. 

The decision by the Monetary Policy Committee (MPC) was unanimous.

"At this level of rates, the policy stance is considered restrictive, consistent with the inflation outlook and the need to address elevated inflation expectations."

Lesetja Kganyago, Governor - SA Reserve Bank

Bruce Whitfield gets comment from Isaah Mhlanga, Head of Markets Research at Rand Merchant Bank on The Money Show.

Mhlanga points out that the problem of sticky inflation is not unique to South Africa.

He highlights two particular risks for South Africa, which are the impact of food price inflation and potential fuel price inflation.

"And then if you look at the SARB's own forecast for where interest rates are likely to go, they have changed that somewhat...

"In the January MPC, the SARB models were projecting a 75 basis point cumulative reduction in the repo rate this year. In this MPC it's now projecting 50 basis points, which means there's been a reduction in what they're expecting."

Isaah Mhlanga, Head of Markets Research - RMB

What the SARB is essentially communicating, Mhlanga says, is to expect less cuts that previously predicted, and potentially even later than initially expected.

Scroll up to listen to Mhlanga's analysis, and watch the Governor's statement below: