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Repo rate remains unchanged

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“The MPC is of the view that there is little evidence of demand-side pressures in the economy.”

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The South African Reserve Bank (Sarb) yesterday said that its monetary policy committee (MPC) has unanimously decided to keep the repurchase rate (repo rate) unchanged at 6.75 percent per year while economic growth forecast was revised down.

South Africa’s central bank raised the repo rate by 25 basis points last November to stem inflation pressures.

Sarb governor Lesetja Kganyago said that the MPC was continuing to assess the stance of monetary policy to be accommodative.

“Monetary policy actions will continue to focus on anchoring inflation expectations closer to the mid-point of the inflation target, in the interest of balanced and sustainable growth,” Kganyago said.

“The MPC is of the view that there is little evidence of demand-side pressures in the economy.”

Kganyago said that the Sarb now expects gross domestic product (GDP) growth for 2019 to average 1.3 percent, down from 1.7 percent in January. The forecast for 2020 is 1.8 percent, down from 2.0 percent, rising to 2.0 percent for 2021, which would be down from 2.2 percent.

Kganyago said the GDP forecast also takes into account the recent electricity tariff increases announced by the National Energy Regulator.

He said that electricity supply constraints and weak business confidence will likely limit near term production and investment prospects.

“The committee remains of the view that current challenges facing the economy are primarily structural in nature,” he said.

“Given current economic vulnerabilities, prudent macroeconomic policies combined with structural reforms that raise potential growth and lower the cost structure of the economy, have become even more urgent.”

The next statement of the MPC will be released on May 23.