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SARB leaves repo rate unchanged

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The South African Reserve Bank has decided to leave the repurchase rate (repo rate) unchanged at 3.5 percent as expectations of future inflation have eased further in the first quarter of this year.

The repo rate remains unchanged.

JOHANNESBURG – The South African Reserve Bank (SARB) has decided to leave the repurchase rate (repo rate) unchanged at 3.5 percent as expectations of future inflation have eased further in the first quarter of this year.

In its first rates decision for the year, Sarb’s Monetary Policy Committee (MPC) decided to hold interest rates in a unanimous decision.

Sarb Governor Lesetja Kganyago today said the overall risks to the inflation outlook appear to be balanced.

Kganyago said the MOC had noted the significant, but likely temporary, reduction in medical insurance price inflation this year after a number of medical aid schemes did not raise their premiums.

“While global food price inflation remains high, local food price inflation is slightly lower than previously expected and should remain broadly contained due to higher local crop production,” Kganyago said.

“Oil prices have increased sharply this year and are expected to remain at these levels over the forecast horizon. Electricity and other administered prices remain upside risks to the inflation trajectory.”

The bank’s consumer inflation forecast for 2021 is higher at 4.3 percent, up from 4 percent, while core inflation forecast for 2021 is slightly lower at 3.3 percent, down from 3.4 percent.

Kganyago said 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. He said the shift in the rate path from the third to the fourth quarter is due to somewhat lower inflation in 2022.

“The MPC will seek to look through temporary price shocks and focus on second round effects,” Kganyago said.

“As usual, the repo rate projection from the QPM remains a broad policy guide, changing from meeting to meeting in response to new data and risks.”

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