South Africa

South Africa Monetary Policy July 2021

South Africa: SARB stands pat in July

At its meeting on 22 July, the Monetary Policy Committee of the South African Reserve Bank (SARB) unanimously decided to leave the repurchase rate on hold at 3.50%, which was in line with market expectations.

The decision to hold fire largely came on the back of uncertain growth prospects and a relatively contained inflation outlook. While the economic performance surprised on the upside in the first quarter, the recent protests are set to weigh on activity in the short term, particularly by hampering investor sentiment and employment. Moreover, the recovery remains uneven across sectors, while the road back to pre-crisis levels is long amid a slow vaccine rollout, renewed restrictions due to a rise in new Covid-19 cases, policy uncertainty and electricity shortages. Turning to inflation, although higher prices for food, electricity and oil could exert upward pressure on prices in the coming months, price pressures are seen remaining contained overall in 2021 and 2022 as the Bank projects easing core inflation, before increasing to around the midpoint of the Bank’s 3.0%–6.0% target range in 2023.

Regarding forward guidance, while the Bank projects a 25 basis-point hike in Q4 this year and each quarter of next year, its stance will remain highly accommodative as it continues to support the economic recovery. That said, the Bank underlined that policy decisions will be data driven and take into account the balance of risks; thus, the projection could change from meeting to meeting. Meanwhile, most of our analysts see the Bank leaving the repo rate at 3.50% through the end of 2021, with only some projecting a hike to 3.75%.

Andrew Matheny, economist at Goldman Sachs, commented:

“While the policy decision and voting was in line with our expectations, the forecast revisions were more dovish than we had anticipated. This—along with our more benign outlook for medium-term inflation than the SARB and consensus—supports our expectation that the SARB will refrain from tightening policy for the foreseeable future.”

The next monetary policy meeting is scheduled for 23 September.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest