Turkey’s central bank keeps rates on hold in line with Fed
That dilemma was compounded by “the (domestic) combination of sharply slowing growth and rising inflation“, bank Governor Lesetja Kganyago told a news conference after it cut its 2015 economic growth forecast to 1.5 percent from 2.0 percent.
While to date the actual slowdown in China has been relatively moderate, a hard landing could have a severe impact on global markets, and on commodity prices in particular, he said.
The hold is a welcome respite as concerns abounded that a rate hike would be the contributing factor that would tip South Africa into a technical recession – that is, two quarters of negative economic growth. “The only area where private sector investment increased markedly was with respect to energy-generation projects”.
“The MPC has to achieve a fine balance between realizing its core mandate and not undermining short-term growth unduly”, Kganyago said. The bank also forecast a 1.6% expansion in 2016. The leading indicator has declined in seven of the last eight months.
“The economy has started to lose some momentum; meanwhile the downside risks to the inflationary outlook have increased”, Mariann Trippon, a Budapest-based economist at Intesa Sanpaolo’s CIB Bank unit, said in an emailed report before the decision.
The dollar had firmed during the previous session after comments from United States Federal Reserve officials pointed to the bank resuming policy tightening by year-end after leaving interest rates on hold last week.
South Africa’s statistics agency publishes consumer and producer inflation data ahead of the rate decision.
The petrol price was expected to remain at its current level “with the weaker rand off-setting the dollar price of oil”.
In the rate-settlers’ assessment, the medium-term achievement of MNB’s inflation target and a corresponding support to the real economy point in the direction of maintaining loose monetary conditions for an extended period, the Monetary Council said in a statement released after today’s meeting.
All 16 economists polled by Reuters had expected rates to be left unchanged.
Lings said the Sarbs’ decision was the right one, given how weak economic growth is and the delay of normalisation by the Fed.
African policy makers anxious that the U.S. Federal Reserve’s liftoff will roil their markets even further, have room to breathe for now.
In a question and answer session, Kganyago assured that the MPC was not influenced by the US Fed decision but took into consideration the context of South Africa.