South Africa Monetary Policy

South Africa

South African Reserve Bank leaves the repo rate unchanged at 5.75%

The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) decided to keep the repurchase rate unchanged at 5.75% at its 21 May meeting. The decision met market expectations. The Bank has increased the repo rate twice since last year to fight high inflation.

The SARB acknowledged that economic growth remains sluggish amid electricity supply constraints and low levels of consumer and business confidence. The Committee expects economic growth in Q1 to have marked a deceleration over the previous quarter mainly due to weak manufacturing output. This month, the Central Bank revised down its GDP forecasts for both 2015 and 2016. Growth is expected to reach 2.1% this year (previously estimated: +2.2% year-on-year) before picking up to 2.2% next year (previously estimated: +2.3% year-on-year). The Bank commented that, “this forecast makes an assumption regarding the persistence of electricity shortages, which are expected to be relieved somewhat in 2017.”

Inflation increased from 4.1% in March to 4.5% in April. Regarding price developments, the Committee added that, “the recent increase in international oil prices and higher agricultural crop prices, along with further electricity price increases from mid-year are likely to sustain the upward momentum.”

Within this setting, FocusEconomics Consensus Forecast panelists expect the repo rate to end this year at 5.92%. For next year, the panel expects the repo rate to end the year at 6.45%.

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South Africa Monetary Policy Chart

SouthAfrica Monetary Policy May 2015

Note: Monetary Policy Rate in %.
Source: South African Reserve Bank (SARB).

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