South Africa’s central bank keeps repo rate steady at 5.75 pct

Pretoria, South Africa (Capital Markets in Africa): – South Africa’s Reserve Bank left interest rates unchanged as expected on Thursday but warned the deteriorating inflation outlook meant the stance cannot be “maintained indefinitely”.

The bank has kept its benchmark rate steady at 5.75 percent since July last year as Africa’s most advanced economy struggles with power shortages being the biggest risk as state utility Eskom fails to cope with demand.

But rising electricity and oil prices could stoke inflation and narrow the central bank’s scope to pause on hiking.

“The deteriorating inflation outlook suggests that this unchanged stance cannot be maintained indefinitely,” Governor Lesetja Kganyago told a news conference.

“The Monetary Police Committee will continue to closely monitor the evolution of inflation expectations and other factors that could undermine the longer term inflation outlook and stands ready to act when appropriate,” said Kganyago.

From the next meeting in July the bank will take steps to increase transparency by publishing the assumptions underlying the its forecast with the Monetary Police Committee statement.

All but one of the 33 economists polled last week said the repo rate would be left unchanged.

South Africa needs much higher growth rates – similar to its peers on the continent – to lower a stubborn 25 percent unemployment rate as it grapples with the energy supply problems and labour relations issues.