“The repo rate (repurchase rate) is the interest rate at which commercial banks can borrow money from the Reserve Bank.” On Thursday a decision was made by the South African Reserve Bank (SARB) to leave the repo rate unchanged. SARB left the repo rate at 5%. The decision was in line with the opinions of 25 economists polled by Reuters last week. The Bank admitted that for the first time in nearly a year they strongly considered a rate cut to boost economic growth.
SARB also made the decision to lower its 2013 growth forecast from 2.7% to 2.4% and raised concerns about the turbulent labour relations in the mining sector with wage negotiations set to start in the coming weeks.
The Bank also raised concerns over South Africa's very tight electricity supply for winter and the high possibility of rolling blackouts in the months to come. Another concern was the weak global demand and the effect this has on our export market with unemployment already stuck at 25%.
SARB Governor Gill Marcus said after reflecting on these difficulties the monetary policy committee discussed a rate cut extensively, but concluded that it would be “premature” for markets to price a rate cut in now.
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