S/Africa’s repo rate to remains unchanged – SARB

“The MPC has decided unanimously to keep the repurchase rate unchanged for now at 6% per annum”.

ASB senior economist Chris Tennent-Brown said the Reserve Bank could’ve lowered its view, and not doing so highlights a risk the Reserve Bank thinks current monetary policy settings are more stimulatory than they actually are.

The Reserve Bank continually monitors the economy for possible changes in the neutral rate, including assessments of consumer attitudes to debt and risk, the economy’s potential growth rate, and global developments.

Still, analysts say the bank will have to relent and hike rates to put a floor under the currency and stop its slide from feeding inflation.

In the first quarter of this year, Trinidad and Tobago’s Gross Domestic Product shrank by 1.7 percent from the same 2014 quarter.

Last week, the US Federal Reserve surprised financial markets by issuing a significantly more dovish-than-expected statement justifying its decision to keep its benchmark interest rate on hold.

Bank credit growth for consumer durables remained low (at 3.9 per cent) in July with vehicle loans recording growth of just 4.8 per cent despite the repo rate coming down by 75 basis points since the beginning of January Rajan, therefore, is likely to oblige with a 25 basis point reduction in rates, the fourth such reduction this calendar year.

Markets now expect an increase in the Fed funds rate to take place sometime in the remaining three months of 2015, especially given the strengthening USA economy. Bloomberg Intelligence economists now anticipate that, barring any significant external shocks, the Fed may move in December, with the Bank of England following early in 2016.

All 10 economists surveyed by The Wall Street Journal had forecast that the central bank would hold interest rates steady in September.

Governor of the Reserve Bank, Lesetja Kganyago said domestic financial markets were not immune to global economic volatility.

The Fed also forecast that inflation would creep only slowly toward its 2% target, which could be seen as a negative for gold, often bought as an inflation-hedge. Of the world’s developed regions, growth in the euro area picked up slightly in the second quarter of 2015. Core inflation – which excludes food, fuel and electricity – measured 5.3% in August, down from 5.4% in July. “The pressures are expected to come from the drought-induced increases in agricultural price inflation for cereals and crops, which increased at a year-on-year rate of 38.7% in July”.

Turkey’s central bank governor said last month that Ankara would move in tandem with policy makers in Washington to counter the fallout from a Fed decision to reverse its extraordinary monetary easing.

A decline in global oil prices has provided some relief.

Friday’s non-farm payrolls data is expected to show the US economy added 203,000 jobs in September with the unemployment rate holding steady after falling in August to 5.1 percent, its lowest since April 2008.