South Africa Monetary Policy January 2018

South Africa

South Africa: Central Bank holds repurchase rate steady in January

January 22, 2018

The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) left the the repurchase rate unchanged at 6.75% at its two-day meeting that ended on 18 January. The decision was widely expected by markets.

The SARB decided to the keep rate on hold as current macroeconomic conditions have stabilized after risks to the inflation outlook dissipated in recent weeks. The South African rand appreciated and domestic bonds rallied once the outcome of the ANC National Conference of 16–20 December became known. Cyril Ramaphosa’s victory as ANC President averted a potential credit downgrade by Moody’s which would have put severe pressure on the rand and the country’s inflation forecast.

The latest economic indicators since the last Central Bank meeting held in November suggest that economic activity is slowly gaining traction. The economy expanded in Q3 at a seasonally-adjusted annualized rate for the second consecutive quarter after exiting a technical recession in Q2. Data from the fourth quarter shows manufacturing output in October and November expanded at a healthy pace, and points to an improvement in business confidence.. Despite this promising outlook, the economy remains under pressure. Annual GDP growth in the second and third quarters largely reflects a favorable base effect rather than the government’s ability to improve the economy’s fiscal position and commit to “credible growth-enhancing” policies.,

The tone of the press statement was upbeat and hinted at a rate cut in one of the upcoming meetings. The inflation outlook for 2018 and 2019 was revised down to 4.9% (previous forecast: +5.2%) and 5.4% (previous forecast: +5.5%), respectively. GDP growth was upwardly revised to 1.4% in 2018 (previous forecast: +1.2%) and 1.6% (previous forecast: +1.5%) in 2019. Despite upward revisions, a potential credit rating downgrade by Moody’s and rand fluctuations due to political developments at home could negatively impact the inflation outlook. Similarly, the recent increases in oil prices are being closely monitored by the SARB regarding how they might impact the inflation outlook.

South Africa Interest Rate Forecast


Panelists participating in the FocusEconomics Consensus Forecast expect that the repurchase rate will end 2017 at 6.43%. For 2018, our panel expects the repo rate to end the year at 6.43%.


Author: Jean-Philippe Pourcelot, Economist

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South Africa Monetary Policy Chart


South Africa Monetary Policy January 2018

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


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