Raising lending rates 'will not attract new investments'
The Reserve Bank says raising lending rates not viable with SA’s credit rating at junk status and will target inflation instead
On Tuesday, SA Reserve Bank governor Lesetja Kganyago said raising lending rates would do little to attract new investments to the country after its credit rating was downgraded to junk. Kganyago, who is due to announce his first rates decision since S&P Global and Fitch cut SA’s credit score to sub-investment grade in April, told online publication The Conversation that the Bank would stick to targeting inflation of 3% to 6%. "Raising the repo rate by itself will do little to attract new investments," Kganyago was quoted as saying. "But failure to deal with the inflationary consequences of currency depreciation, which pushes up import prices and potentially all prices, will also push up both short-and long-term borrowing costs." The rand plunged more than 12% in the wake of President Jacob Zuma’s decision, in late March, to recall former finance minister Pravin Gordhan from meetings with investors overseas and then fire him a week later. Price growth in March slowed to 6.1%. Statis...
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