Repo rate unchanged at 5%

2013-09-19 16:23

The SA Reserve Bank has left its key lending rate at current four-decade lows, said governor Gill Marcus.


The bank’s inflation forecast has deteriorated further since the previous meeting of the monetary policy committee (MPC).

The forecast for 2013 is unchanged at an average of 5.9%, but inflation is now expected to average 5.8% in 2014 compared with 5.5% in the previous forecast.

The current breach of the inflation target is still expected to be temporary, and the peak was possibly reached in August.

The deterioration in the forecast is mainly owing to changes in assumptions related to the rand exchange rate and petrol prices, but given the overnight developments these assumptions will be revisited on an ongoing basis.

The risk to the inflationary outlook from the exchange rate remains elevated and dependent on its future trend. A sustained depreciation trend could pose a significant risk to the inflationary outcome.

Economic growth

The domestic growth outlook is unchanged since the previous MPC meeting. The real GDP growth rate of 3.0% recorded in the second quarter of 2013 was driven mainly by a recovery in the manufacturing sector, following the marked contraction in the first quarter.

Despite the rebound, growth was below the estimated potential of around 3.5% and the negative output gap widened further. The bank’s forecast of GDP growth is unchanged: Growth is still expected to average 2% in 2013 and 3.3% and 3.6% in the next two years, respectively.

US Federal reserve

The decision by the US Federal Reserve to delay tapering surprised the markets, and emerging market currencies in particular responded strongly, with many seeing significant overnight currency appreciation.

The expectation that US quantitative easing would end prompted a sell-off of emerging market assets, which has the risk of further undermining the weaker growth outlook that has been apparent for some time.

While financial markets in these countries have reacted positively to the Fed’s decision not to begin tapering at this stage, the underlying weaknesses are expected to persist.


Manufacturing output is expected to be adversely affected by protracted strikes, particularly in the motor vehicle sector.

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