Repo Rate Unchanged

Local headline consumer inflation quickened to 4.6% year-on-year in June, from 4.4 % in May, data from Statistics South Africa indicated on Wednesday.

Local headline consumer inflation quickened to 4.6% year-on-year in June, from 4.4 % in May, data from Statistics South Africa indicated on Wednesday. Core inflation, which excludes the price of food, non-alcoholic beverages, petrol and energy, fell to 4.2% year-on-year from 4.4%.

The monetary policy committee of the SA Reserve Bank (SARB) left the repo rate unchanged at 6.5% following its policy meeting on Thursday. With the repo rate unchanged, the prime lending rate will remain at 10%. Among the risks to inflation identified by the monetary policy committee were the strength of the US dollar, a sustained period of high oil prices, escalating trade tensions and higher electricity prices. Bear in mind that the primary mandate of the SARB is inflation targeting, and the target range for 2018 is between 3% and 6%.

South African Reserve Bank governor Lesetja Kganyago said the central bank expects gross domestic product (GDP) growth of 1.2% in 2018, which is down from its previous estimate of 1.7%. This follows a contraction in GDP by 2.2% in the first quarter of the year, and early indications of modest growth in the second quarter.

Local markets responded well during the past week and gained 1.12% in total. The industrial sector saw the biggest gain, by 2.12%, followed by the financial sector with 1.77%. The resources sector ended the week lower on the back of weaker commodity prices and lost 0.91% in value. 

In the US, Fed chair Jerome Powell told lawmakers that the economy is strong and additional rate hikes are likely.

The Chinese yuan’s losses accelerated as trade discord between US and China intensified. Markets would seem to regard Chinese officials’ willingness to allow the currency to decline as a measure taken partially to offset the impact of US tariffs.

The International Monetary Fund (IMF) reiterated its forecast that global gross domestic product will expand 3.9% this year and in 2019 despite growing trade tensions. The IMF, however, highlighted the fact that the growing trade tension between the US and China is a major downside risk.

The rand traded weaker at around R13.40, mostly on the back of a stronger USD. The price of Brent crude oil fell to around $72.71 per barrel. The producer price index (PPI) data expected this coming Wednesday will be a good predictor of future inflation trends.

 

Regards,

SECURITAS – Wealth Management
























Securitas Financial Group is a Registered Financial Services Provider (FSP) FSB license number 6536

Johan Steyn, RFP®, Cell. 082 680 9510, johan@securitas.co.za; 

Albert van der Linde, B.Com (US), B.Com (Hons)(UP), Cell. 076 087 3084, albert@securitas.co.za;

Hannes Bresler, CFP®, B.Com (Hons)(UJ), Pr.Tech Eng, Cell. 082 823 7973, hannes@securitas.co.za;