Bank keeps repo rate at 7% amid crisis

South Africa’s central bank kept its benchmark repo rate unchanged at 7% yesterday, in line with expectations, saying the near-term outlook of inflation had deteriorated, while the domestic growth outlook remained constrained. All 27 economists polled by

expected the repo rate to be kept on hold.

The bank says it expects growth in 2016 averaged at 0.4%. Growth for 2017 has been revised down marginally to 1.1% from 1.2%

And 2018 is expected to see 1.6% (unchanged) growth. The RMB BER business confidence index declined in the fourth quarter, driven by low new vehicle sales.

The bank said medium annual inflation expectations seem relatively unchanged at 5.5% for 2018.

With the back of the El Nino drought broken, food price inflation is expected to decrease later in the year. But it warns meat prices are likely to remain relatively high as farmers restock their herds.

The bank’s monetary policy committee has noted a marked deterioration in the inflation forecast. Inflation is expected to return to the target range in the fourth quarter of 2017. While it is a cause for concern, the main drivers are supply side shock: oil and food prices especially.

Risks to the inflation outlook are seen moderately on the upside, it says. – Reuters, Business