South Africa Monetary Policy November 2016

South Africa

South Africa: South African Reserve Bank keeps repo rate unchanged in November

November 24, 2016

On 24 November, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) decided to leave the repurchase rate unchanged at 7.00%. So far this year, the Bank has increased its benchmark rate twice to fight high inflation.

According to the Central Bank, the economy likely expanded in the third quarter, although at a slower pace than in the previous quarter, thanks to growth in the mining and service sectors. Business confidence and consumer spending nevertheless remain subdued. The rand appreciated against the U.S. dollar from the middle of October due to positive domestic developments such as a recently improved trade balance, although it subsequently fell after the U.S. election result. Going forward, the Bank commented that, “the rand is expected to remain sensitive to changes in the stance of U.S. monetary policy.” The Central Bank also added that domestic growth prospects remain modest and maintained its growth forecasts for both 2016 and 2017 of 1.2% and 1.6%, respectively.

Regarding price developments, the Bank commented that inflation reached 6.4% in October, up from 6.1% in the previous month and outside the Central Bank’s 3.0%-6.0% target band. The price increase was driven by a sharp spike in food prices. The Bank’s inflation estimates are unchanged at 6.4% in 2016 and 5.8% in 2017. However, the SARB considers there to be greater upside risks to inflation than previously indicated due to international developments causing a potential depreciation of the rand. According to the Bank, “while the Committee retains the view that we may be close to the end of the hiking cycle, there may be a reassessment of this position should the upside risks transpire.”

FocusEconomics Consensus Forecast panelists expect the repo rate to end this year at 7.03%. In 2017, the panel expects the repo rate to end the year at 7.09%.

Author:, Economist

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South Africa Monetary Policy Chart

SouthAfrica Monetary Policy November 2016

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

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