The SA Reserve Bank's announced on Thursday afternoon that it will keep the repo rate unchanged at 6.5%.
The announcement was made by the central bank's governor Lesetja Kganyago at a media briefing in Pretoria.
The decision was a close call. Kganyago said that four members of the bank's monetary policy committee preferred an unchanged stance, while three members advocated for a 25 basis points, or a quarter of a percentage point increase.
Ahead of the announcement, many economists thought it likely that the bank would keep the rate unchanged, especially in light of a decrease in the consumer inflation rate for August.
"While the call between an interest rate hike and no change at September’s MPC meeting was a closer call at the start of the week, the markets are now leaning to reduced expectations for an interest rate hike," said Annabel Bishop of Investec in a note to clients before the announcement was made.
The repo rate is the benchmark interest rate at which the bank lends money to other banks. Changes in the repo rate affect the prime lending rate, which is the lowest rate at which banks start lending to clients. With the repo rate unchanged, the prime lending rate will stay at 10%.
The rand remained stable in the wake of the announcement. At 15:26 it was changing hands at R14.42/$, up 1.8% on the day.
In light of the recession, Kganyago said the bank was forecasting GDP growth in 2018 to average 0.7%, down from 1.2% in July.
Its forecasts for 2019 and 2020 have remained unchanged at 1.9% and 2.0% respectively
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