30.01.2014

Unexpected interest rate increase

The Monetary Policy Committee yesterday (29 January 2014) announced an increase of 50 basis points in interest rates, bringing the repo rate to 5,5% and the prime interest rate to 9%. The MPC had to consider the local economic pressures, defined by concerning growth outlooks, low credit extension, capital outflows, increased current account deficit, job losses and the low gross fixed capital formation in the private sector. As it is the Reserve Bank’s primary responsibility to keep inflation under control, the main overarching influencers to the decision, is the continuing upside pressures on the inflation outlook together with the depreciating currency.

The MPC had to consider the local economic pressures, defined by concerning growth outlooks, low credit extension, capital outflows, increased current account deficit, job losses and the low gross fixed capital formation in the private sector. As it is the Reserve Bank’s primary responsibility to keep inflation under control, the main overarching influencers to the decision, is the continuing upside pressures on the inflation outlook together with the depreciating currency.

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