South African Reserve Bank Interest Rate Decision

SARB Interest Rate Decision is announced by the Monetary Policy Committee 6 times a year. The Reserve Bank's interest rate is used to provide loans to commercial banks. Establishing an interest rate is one of the main monetary policy measures used by the Bank to regulate the strength of the national currency.

The decision is adopted by a vote of six committee members 6 times a year, during the Committee meeting. The rate serves as a guide for short-term interest rates. For example, if the regulator increases the interest rate, banks are forced to increase the rates at which they provide loans to the population. This leads to an increase in money holding costs. Such a measure can help in controlling inflation: the demand for loans spent on the purchase of goods and services decreases. These measures are part of the monetary policy implemented by the South African Reserve Bank.

An increase in the interest rates makes a country attractive for foreign investments (with unchanged investment risks). In an attempt to prevent capital outflows, the interest rates of such countries can react accordingly. Thus, South African interest become more sensitive to changes in other financial markets.

If the bank is cautious about the inflationary prospects of the South African economy and decides to raise interest rates, the decision announcement can be seen as positive for the national currency quotes. A decision to cut rates can push ZAR quotes down.