South Africa

South Africa Monetary Policy November 2020

South Africa: SARB on hold in November

At its meeting on 19 November, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) decided to leave the repurchase rate unaltered at its historic low of 3.50%. While the decision was in line with market analysts’ expectations, it was not unanimous as two of the five-member committee voted for a 25-basis-point cut.

The Bank’s decision to stand pat came against a backdrop of an uncertain economic environment and muted inflationary pressures. Although available data suggests economic activity improved in the third quarter as Covid-19 restrictions were lifted, the road back to pre-pandemic levels remains bumpy amid elevated uncertainty over the pandemic’s trajectory and the rapidly rising number of new virus cases globally. Turning to inflation, price pressures remain contained, weighed on by economic slack and muted global oil prices. The subdued economic backdrop should keep inflation below the midpoint of the Bank’s 3.0%–6.0% target band this year and next.

Regarding forward guidance, despite the relatively dovish bias on the policy stance, as indicated by two MPC members favoring further easing, the SARB projected no further rate cuts in the near term.

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