PRETORIA: South Africa's central bank unexpectedly cut its benchmark lending rate for the first time in five years on Thursday, citing weak growth and easing inflation, and denied any pressure from recent political attacks against its mandate.
South Africa's main anti-graft watchdog recommended last month that the central bank mandate be changed to place more focus on growth and not just inflation and protecting the value of the currency, the rand.
Kganyago, who has launched legal proceedings to counter the challenge, said the central bank remained independent and had not come under any pressure to cut rates.
He said the regulator eased rates due to weak growth and an improved inflation outlook, but said monetary policy alone would not be enough to spur a recovery languishing in recession.
"No President past or present, no Minister of Finance past or present has ever attempted to tell the SARB how to go about implementing its mandate," he said. "We are not under any political pressure."
The 25 basis points cut to 6.75 percent was the first reduction in lending rates since July 2012 and ran counter to market consensus that it would keep them steady.
The rand fell nearly one percent after the decision, while government bonds firmed more than 10 basis points.
Kganyago also halved the bank's 2017 growth forecast to 0.5 percent, and trimmed the projection for next year to 1.2 percent.
The recession in Africa's most sophisticated economy is adding to pressure on President Jacob Zuma, who is also handling fallout from credit downgrades and massive corruption scandals that have further dented investor confidence.
Comments
Comments are closed.