PRETORIA, Oct 1 (Reuters) - South Africa will keep paying a high rate of interest on the loans it needs to plug a widening budget deficit until its fiscal problems are addressed, the central bank said on Tuesday.
The South African Reserve Bank (SARB) has resisted political pressure to drastically lower the repurchase, or repo rate, to boost flat-lining growth, which it sees at 0.6% in 2019, pointing to fiscal rather than monetary policy as the root of the problem.
In its biannual Monetary Policy Review publication, after it kept lending rates steady at 6.5% on Sept. 19, the bank however hinted that it was willing to lower rates to support growth but warned that the impact would not last.
“Even with low potential growth, it is still possible to have cyclical deviations from the trend, and these deviations should be responsive to interest rate adjustments – even if the larger growth problem … is beyond the powers of monetary policy,” the SARB said. (Reporting by Mfuneko Toyana; Editing by Lisa Shumaker)