Central bank keeps repo rate unchanged at 3.5%
The South African Reserve Bank’s Monetary Policy Committee (MPC) has kept the repo rate on hold for a sixth consecutive time.
The MPC concluded its meeting on Thursday.
The repo rate stands at 3,5% while the prime lending rate is expected to remain at 7%.
The central bank’s governor Lesetja Kganyago says the decision was unanimous.
“These repurchase rate levels reflect a highly accommodative policy stance through the end of 2022, keeping financial conditions supportive of credit demand as the economy recovers from the pandemic and associated lockdowns.
“The bank has ensured adequate liquidity in domestic markets and will continue to closely monitor funding markets for stress. In addition, regulatory relief provided to banks continues to support lending to households and firms.”
#reporate | JUST IN: Reserve Bank governor Lesetja Kganyago says the MPC unanimously decided to keep the repurchase rate unchanged at 3.5%. pic.twitter.com/ux3Wg6oGsy
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The central bank expects rates to increase by 25 basis points in the fourth quarter of 2021 and in each quarter of 2022.
According to Kganyago, global economies are still at the mercy of the Covid-19 pandemic.
Despite steady improvements in vaccination rates, stronger confidence and better global economic growth, Covid-19 continues to weigh on global prospects.
Vaccination rates are also lagging in many emerging market and developing countries.
“Lockdowns and other restrictive measures that remain in place in a number of countries will continue to weigh on economic activity, particularly in sectors dependent on close contact, such as travel, tourism, hospitality and leisure.
Global growth is forecast at 6.1% in 2021, 4.4% in 2022 and 3.4% in 2023.
“Recoveries in emerging market and developing economies are expected to lag those in advanced economies, in large part due to a slower pace of vaccinations,” says Kganyago.
Meanwhile, the domestic economy grew by 4.6% in the first quarter of 2021 - much stronger than the 2.7% earlier anticipated.
But Kganyago believes last week’s unrest will have a lasting impact on investor confidence and job creation.
“We estimate the unrest to have fully negated the better growth results from the first quarter, resulting in an unchanged estimate of 4.2% for growth in 2021.
“GDP is expected to grow by 2.3% in 2022 and by 2.4% in 2023, unchanged since the May meeting.”
The central bank expects economic and financial conditions to remain volatile for the foreseeable future.
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