Wesbank

BoB keeps bank rate at 5%

SHARE   |   Thursday, 30 August 2018   |   By Kabelo Adamson
BoB Governor Moses Pelaelo BoB Governor Moses Pelaelo

Despite keeping the bank rate at five percent for almost a year now, the central bank Monetary Policy Committee says it would be wrong to conclude that this is the new normal.

Over the past few months, analysts have argued that the lower rate has become the new normal and does not see the bank rate changing anytime soon. On Thursday this week, BoB Governor Moses Pelaelo announced that they have taken a decision to maintain the rate at 5 percent.

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BoB Head of Research and Financial Stability Dr Tshokologo Kganetsano said it means in their assessment over period, circumstances did not warrant any change. “Should there be a need for us adjust the bank rate in either direction we will do so accordingly, so I will be wrong to say this is the new normal,” said Dr Kganetsano. He explained that the change in the bank rate is influenced by recent developments in the economy and prospects going forward.

Pelaelo added that at their meetings, they take decisions based on data that is available to them at that time and carefully scrutinize it before taking a decision to adjust the rate. “It is not a passive posture and the rate could have gone either way, but it stayed where it is because data available has shown that there is no reason for adjustment,” the governor explained, adding that they have kept it current levels for good reasons.

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A day before the central MPC met, Standard Chartered Bank chief executive officer Mpho Masupe told this publication that they have come to accept the current levels of the bank rate as the new normal. “We cannot come here and cry about the low bank rate, we just need to find ways to go about it,” said Masupe on Wednesday this week when the bank unveiled its financial half year results.

He said they would be happy should the bank rate go up, but as it stands he says they have accepted the situation and just need to find the strategy to deal with the lower rate.

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In maintaining the rate at 5 percent, Pelaelo said the current state of the economy and the outlook for both domestic and external economic activity suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the objective range of 3 – 6 percent in the medium term.

Pelaelo explained that the projected accommodative monetary conditions in the domestic economy and expansion in government expenditure, as well as relative stability in water and electricity supply, are expected to support expansion of economic activity in the non-mining sectors.

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“Overall, the economy is expected to operate close to, but below full capacity in the medium term, thus posing no risk to the inflation outlook,” he said.



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