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Sarb holds repo rate at 3.5%

Decision unanimous.
Reserve Bank governor Lesetja Kganyago. Image: Moneyweb

The South African Reserve Bank (Sarb) decided to keep the repo rate steady at 3.5% on Thursday, following the conclusion of its latest Monetary Policy Committee (MPC) meeting.

This is in-line with expectations of most economists and market commentators.

The unanimous decision to hold the rate for the fourth consecutive MPC meeting, means that the prime lending rate of commercial banks remains at a more than four decade low of 7%.

It comes despite headline Consumer Price Inflation (CPI) slowing to 2.9% year-on-year in February from 3.2% in January, according to data released by Statistics South Africa on Wednesday.

The latest inflation figure is below the bottom end of Sarb’s 3%-6% CPI target. However, rising crude oil and food prices are expected to gain traction in April with a more than R1 hike in petrol forecast.

Read: AA warns of over R1-a-litre petrol price hike in April

This, together with continuing Covid-19 uncertainty and increasing prospects of a third wave of infections in the country, has seen Sarb governor Lesetja Kganyago and his fellow MPC members remain cautious on any further repo rate cuts.

In the wake of the Covid-19 pandemic, subsequent lockdowns and financial fallout, the Sarb slashed its repo rate by 300 basis points in total last year.


Sarb‘s first-quarter forecast for economic growth is at -0.2%, down from 1% at January’s MPC meeting.

“Global growth, progress in vaccination, a low cost of capital, and high commodity prices are all supportive of growth. However, new waves of the Covid-19 virus are likely to weigh on economic activity both globally and locally,” said Kganyago.

“In addition, ongoing constraints to the domestic supply of energy and uncertainty about vaccine rollout continue to pose downside risks to growth,” he noted.


The governor said overall risks to the inflation outlook appear to be balanced. Local food price inflation is lower despite global highs; medical services inflation remains low, but this is likely temporarily.

“Oil prices have been revised up sharply in the forecast, resulting in higher petrol price inflation, at 12.7% for 2021, compared to 4.4% at the time of the January meeting. Electricity prices are significantly higher at 9.7% for 2021 [up from 8.1%],” Kganyago, however pointed out.

He said market-based expectations for short-term inflation are lower, but have increased for the medium and longer-term horizons.

“While global food price inflation remains high, local food price inflation is slightly lower than previously expected and should remain broadly contained due to higher local crop production,” he explained.

“Oil prices have increased sharply this year and are expected to remain at these levels over the forecast horizon… Electricity and other administered prices remain upside risks to the inflation trajectory,” he added.

The governor said unless the outlined risks materialise, inflation is expected to be well contained in 2021, before rising to around the midpoint of the inflation target range in 2022 and 2023.

Meanwhile, Kganyago indicated that the MPC may increase the repo rate later this year.

“The implied policy rate path of the [Sarb’s] Quarterly Projection Model [QPM] indicates an increase of 25 basis points in each of the second and fourth quarters of 2021. Compared to the previous meeting, the shift in the rate path from the third to the fourth quarter is due to somewhat lower inflation in 2022,” he said.

“As usual, the repo rate projection from the QPM remains a broad policy guide, changing from meeting to meeting in response to new data and risks,” he however added.

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Must respect to you Governer and the MPC, always make decisions in the best interest of SA.

Interest rates will stay forever low, downward trend globally for the last 30+ years. Whoever tells you what, that trend will continue, simply more debt to consumers exponentially over the last 30+ years basically guarantee this trend.
Furthermore, Japan is a typical example of government growing their debt forever. The USA started with Obama (from 10 to 20 trillion dollars) to follow the same route, Trump also (from 20 to 27 trillion dollars), and Biden’s forecast will jump to 47 trillion dollars.
This is also the reason for our strong Rand currently.

While I agree with the sentiment that regardless of who the US president is they all love deficit spending I refuse to believe it started with Obama.
That honor goes to Bush. (The war on terror didn’t pay for itself)

Bush was the first to double the US national debt in his term, it stood at 5.1T at the start of his term in 2001.

Yes you right, I forgot to include Bush.

One thing I’ve noticed at the shops, is the fact that stuff like meat tried very hard to be inflationary, but then it just sat on the shelf (or they just carried less and less stock). Of late the prices started backtracking a bit, as merchants try to gauge the highest price they can squeeze out of consumers. But still few people buy, or they are buying cheaper cuts. Mutton and lamb basically priced themselves right out of most trollies. The lesson for merchants should be that you can be as inflationary (greedy) as you want, but the consumer will wack you back in line if they just don’t have the money. The lesson for us should be that we, as consumers, can have the upper hand, if we decide to use our power, instead of giving it away, like we do our voting power.

Farmers don’t get those prices, those markups are ridiculous.

Jip. Eskom 15% (not the first time), Labour 16% (not the first time), Gas 15% plus. The consumer can start wacking. With regards to agriculture produce, they’ll be wacked back shortly – proudly brought to you by government.

My prediction is that there will be the need for emergency meetings towards the end of the year.

End of comments.





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