South Africa’s Kganyago Holds Interest Rate in Debut MeetingRene Vollgraaff and Amogelang Mbatha
Lesetja Kganyago kept South African borrowing costs unchanged in his debut policy meeting as Reserve Bank governor, reinforcing his pledge for continuity.
The repurchase rate was left at 5.75 percent, Kganyago told reporters today in the capital, Pretoria, matching the forecasts of 20 of the 27 economists surveyed by Bloomberg. The rest predicted a 25 basis-point increase.
Kganyago, 49, extended the pause in the monetary policy-tightening cycle after 75 basis points of increases this year, giving support to an economy battered by strikes and power outages. A 30 percent drop in the oil price since June has eased price pressures, keeping inflation within the central bank’s 3 percent to 6 percent target for a second month.
“We could remain on hold for a fair period,” Arthur Kamp, chief economist at Sanlam Investment Management, said by phone from Cape Town. “The next rate increase is not likely before growth picks up quite materially and I’m not sure that is going to happen anytime soon.”
Inflation was unchanged at 5.9 percent in October, the statistics office said on Nov. 19. Consumer-price growth will probably average 6.1 percent this year, down from a previous estimate of 6.2 percent, and ease to 5.3 percent in 2015, the governor said.
The plunge in oil prices have had a “significant impact” on the inflation outlook and given the weak domestic growth environment, the risks to the inflation forecasts are “more or less balanced,” Kganyago said. At the Sept. 18 meeting, policy makers said the risks were “skewed to the upside.”
“The committee remains of the view that interest rates will have to normalize over time,” the governor said. “The timing of future interest-rate increases will be dependent on a range of factors, including the evolution of inflation expectations, the speed of normalization of monetary policy in the U.S. and the state of the domestic economy.”
The government has cut the benchmark price of gasoline by 8.2 percent since July, while the rand has gained 0.4 percent against the dollar since the previous MPC meeting. The currency was at 10.9737 against the dollar as of 3:51 p.m. in Johannesburg from 10.9864 before Kganyago began speaking.
Kganyago on Nov. 9 took over from Gill Marcus, who stepped down after leading the central bank for five years. He has pledged to continue the policy of his predecessor, who adjusted interest rates just three times in the past three years.
Strikes at platinum mines and manufacturers this year have curbed expansion in Africa’s second-largest economy, weakened demand and prompted credit-rating companies to downgrade the nation’s debt.
The MPC lowered its growth forecast for this year to 1.4 percent from 1.5 percent and estimated expansion of 2.5 percent in 2015.
Moody’s Investors Service on Nov. 6 cut South Africa’s rating to Baa2, the second-lowest investment grade, citing slower growth and rising debt levels. Standard & Poor’s and Fitch Ratings Ltd. will publish their rating reviews on Dec. 12.