SA Reserve Bank leaves repo rate unchanged at 3.5%

THE South African Reserve Bank (SARB) today left the repurchase rate (repo rate) unchanged, at 3.5 percent, as the outlook on inflation was revised higher.

SARB governor Lesetja Kganyago said the decision to leave interest rates unchanged was unanimous among all five Monetary Policy Committee (MPC) members.

However, Kganyago warned that the implied policy rate path of the Quarterly Projection Model (QPM) indicated an increase of 25 basis points in the fourth quarter of 2021 and in each quarter of 2022.

“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,” he said.

“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.

Kganyago, however, warned that the risks to the inflation outlook appeared to be on the upside, despite weaker than expected services inflation outcomes in recent months.

He said risks emanated from rapid global producer price inflation, food price inflation, petrol, electricity and other administered prices.

Statistics SA yesterday reported that inflation rose to 4.9 percent in June, down from 5.2 percent in May, driven by rising prices of food and transport.

SARB thus revised the headline inflation forecast higher for 2021 to 4.3 percent, from 4.2 percent.

For 2022, SARB inflation would be anchored around 4.2 percent and remain unchanged at 4.5 percent in 2023.

BUSINESS REPORT ONLINE