REPO RATE INCREASE BY 25 BASE POINTS

The Reserve Bank’s Monetary Policy Committee (MPC) has decided to raise the repo rate by 25 basis points to 5.75%, effective from July 18.
It was not unanimous, with a 6:1 ratio. One person voted to hold the repo rate and another to raise it by 50 basis points.

“We don’t think we’re in recesion. The challenge is we’ve got very low growth,” said Marcus.

The growth outlook has deteriorated. Sarb sees GDP averaging at 1.7% in 2014 – assuming there is a speedy resolve to current strikes.

“The economic growth outlook has deteriorated against the backdrop of protracted strike action in the mining and manufacturing sectors. The economy contracted in the first quarter of 2014 and the growth outlook for the rest of the year remains subdued amid low business confidence.”

Inflation is expected to average 6.3% in 2014 as opposed to 6.2% previously.

“Compounding the MPC’s policy dilemma, inflation has breached the upper end of the target range, driven primarily by the exchange rate depreciation and rising food prices, while a possible wage price spiral resulting from recent wage settlements and wage demands, considerably in excess of inflation and productivity growth, have added to the upside risk of the inflation outlook.”

This article via Moneyweb.