South African Reserve Bank To Keep Interest Rates At Record Lows

South African Reserve Bank To Keep Interest Rates At Record Lows. The South African Reserve Bank (SARB) is expected to keep interest rates at an all time low this month.

According to a Reuters poll 17 out of 20 economists believe that Reserve Bank governor Lesetja Kganyago will keep the repo rate at 3.5% for the remainder of 2021 as Covid-19 continues to batter global economies. The 3 remaining economists suggest that a 25 bps cut will be made.

Inflation is expected to average 3.8% this year, lower than the midpoint of the Reserve Bank’s comfort range of 3-6%, which turned much weaker last year compare to the previous year, said Reuters.

The Monetary Policy Committee (MPC) halted its cutting cycle after easing by 275 basis points since March, when the country’s first virus case was confirmed. It now projects two increases of 25 basis points each n the second half of 2021.

The MPC said, “…any significant shocks to the economy from the second wave of the pandemic could see it push out the hikes and hold the benchmark rate, especially if it trims its inflation forecast further.”

The Deputy Governor Fundi Tshazibana said uncertainties over the outlook for the economy and price growth also mean the panel hasn’t closed the door on rate cuts. “We think a hoppy recovery will force the SARB to push back the two rate hikes it has signaled for 2021, with rates staying on hold through 2021.” said Bloomberg Economics.

According to Reuters the country’s economy is expected to grow 3.5% in 2021 and 2.0% in 2022. The World Bank puts the figures at 3.3% in 2021 and 1.7% in 2022.

By Thomas Chiothamisi

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