TIGHT REIN
…SA’s Reserve Bank keeps rates on hold, revises growth higher
JOHANNESBURG
During a media briefing, Reserve Bank Governor Lesetja Kganyago said that all members of the Monetary Policy Committee were in favour of keeping the repo rate on hold. The prime rate also remains unchanged at seven percent.
The committee expects inflation to remain close to the midpoint, or 4.5 percent of the three percent to six percent target range.
According to the central bank, core inflation is revised higher to three percent in 2021, from 2.9 percent estimated previous
- The SA Reserve Bank has kept the repo rate unchanged at 3.5 percent, in line with economists' expectations.
ly.
"We expect it (core inflation) to be contained this year and next year. Even in the outer year in 2023, when it rises - to 4.3 percent - it will still be remaining below the midpoint of the inflation target range. Which then tells us that inflationary pressures are contained," said Kganyago.
Headline consumer price inflation for 2021 has been revised slightly higher to 4.4 percent, up from 4.3 percent.
Among the risks to short- term inflation outlook are global producer price and food price increases, oil prices, as well as electricity and other administrative prices. Long-term risks include a weaker currency, higher domestic import tariffs, and escalating wage demands.
The bank revised the growth outlook from 4.2 percent to 5.3 percent. This is despite the much larger negative effect on output than was previously estimated from the July unrest, explained Kganyago.
"Our revised estimate for third quarter economic growth is -1.2 percent, compared to the previous -0.5 percent. Output in the manufacturing sector fell by 8.0 percent in July alone. Mining was up 4.1 percent, while land freight transport fell by 5.0 percent and retail output was down by 11.2 percent," he noted.
Ahead of the SA Reserve Bank briefing, the Bureau for Economic Research had expected
the growth outlook to be raised above five percent.
However, the July unrest is expect to weigh on the economy. "The July events and the pandemic are likely to have lasting effects on investor confidence and job creation, impeding recovery in labour-intensive sectors hardest hit by the lockdowns," Kganyago said. –