BoB holds bank rate at 5%

Mbongeni Mguni | Tuesday February 13, 2018 17:43

 

For consumers, the decision means those with existing bank loans will neither pay more or less than they are currently, for their repayments. For banks, the decision maintains the margins they are currently operating on.

The bank rate, exclusively managed by the BoB, underpins all other interest rates within the market and any adjustment to it affects indicators such as the prime rate, the deposit rate and others.

A committee of the central bank meets approximately every two months to decide on any movements of the bank rate, basing its decision on the local inflation outlook in relation to that obtaining in trading partner countries, as well as other considerations such as supporting local economic activity.

Central bank governor, Moses Pelaelo told journalists that while the BoB expects inflation to remain within the three to six percent medium term objective, upside risks exist.

“This outlook is subject to upside risks emanating from improving global economic activity and the rise in commodity prices beyond current forecasts.

“Furthermore, any substantial unanticipated upward adjustment in administered prices and government levies and/or taxes also present upside risks to the inflation outlook,” he said.

The economy is expected to warm up this year, fuelled by greater government expenditure as proposed in the 2018/19 budget, as well as stability in water and electricity supply.

These particular factors are expected to especially support the non-mining, while the mining sector is expected to rebound as well in line with increased global growth. Government expects 5.3% growth this year, up from the projected 4.7% from last year.

“Overall, the economy is expected to operate close to, but below capacity in the medium term,” Pelaelo said.