The South African Reserve Bank’s Monetary Policy Committee has decided to keep the repo rate unchanged at 3.5% per annum as the overall risks to the inflation outlook appeared to be balanced in the near to medium terms, SARB governor Lesetja Kganyago confirmed on Friday.
The decision to leave the repo rate unchanged was unanimous, the governor told a virtual media briefing after the MPC meeting.
The decision was made in light of the fact that the country’s inflation was expected to be well contained in 2021 – before it rises to around the midpoint of the inflation target range in 2022 and 2023, Kganyago said.
The MPC forecast that headline consumer price inflation would be 4% in 2021, 4.5% in 2022 and 4.6% in 2023, he noted.
“Against this backdrop, the MPC decided to keep rates unchanged at 3.5% per annum,” he said.
According to the governor, the implied policy rate path of the quarterly projection model (QPM) indicated an increase of 25 basis points in each of the second and fourth quarters of 2021.
“Compared to the previous MPC meeting, the shift in the rate path from the third to the fourth quarter is due to somewhat lower inflation in 2022,” he said.
He added: “Monetary policy continues to be accommodative, keeping financial conditions supportive of credit demand as the economy recovers from the pandemic and associated lockdowns.”
The governor said the apex bank had ensured adequate liquidity in domestic markets and would continue to closely monitor funding markets for stress, adding that regulatory relief provided to banks continued to support lending to households and firms.
NM/jn/APA