South Africa: Sarb Likely to Hold Rates Despite Oil Worries After Attacks On Saudi Arabia


South Africa's central bank is likely to keep its key lending rate steady at 6.5% on Thursday 18 September when its MPC concludes its bimonthly meeting. The inflation and growth outlooks suggest there is scope for a cut, but there are worries on the fiscal front. And the oil price has become a cause for concern in the wake of the attacks on Saudi Arabia.

The SA Reserve Bank (SARB), which cut its repo rate by 25 basis points in July to 6.5%, has plenty of room to bring rates lower. Inflation in July slowed to a seven-month low of 4% from 4.5% in June. The economy has dodged a recession, but the growth outlook remains poor, to say the least. And confidence has been absolutely shattered: the Rand Merchant Bank business confidence index plunged to a two-decade low in the third quarter.

The case for a rate cut hardens when one looks at consumption and the retail sectors, key drivers of growth, which also remain in the doldrums. The official unemployment rate is a staggering 29% and is in reality much higher. Inflation, which the central bank targets, is relatively subdued precisely because of these factors. An economy that...

See What Everyone is Watching

More From: Daily Maverick

Don't Miss

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.