Breaking News - Reserve Bank kept interest rate unchanged

The Reserve Bank Governor, Lesetja Kganyago, said yesterday that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.

That leaves the repo rate on the same “spot” since July’s cut of 25 basis points – first cut in five years. With a pair of possible credit rating downgrades hanging over SA, there was little expectation that the Bank would cut rates this time – unlike in September, when the decision to hold the repo steady came as a surprise to many.

While SA's moribund economy could do with the potential stimulatory effects of a rate cut, the threat of the downgrades to junk constrains the Bank. Downgrades – which could come on Friday night, when Moody's and S&P Global Ratings are expected to announce their decisions – would negatively effect the rand, which has a direct impact on inflation, and the bond market, affecting the price government pays to borrow money.