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S/Africa’s repo rate unchanged at 3.5 percent

South Africa's Reserve Bank, for the second quarter in a row, has decided to keep the repo rate unchanged at…

South Africa’s Reserve Bank, for the second quarter in a row, has decided to keep the repo rate unchanged at 3.5 percent per annum due to a projected positive growth in the third quarter, APA learnt on Friday.Reserve Bank Governor Lesetja Kganyago, in an announcement during a virtual briefing following the bank’s Monetary Policy Committee (MPC) meeting, said the decision to keep the repo rate at 3.5 percent was unanimous.

Kganyago said the MPC now expected the country’s economy to grow by 4.2 percent– up from 3.8 percent — following an expansion of 6.3 percent in the fourth quarter of 2020.

“The stronger growth forecast for 2021 reflects better sectoral growth performances and a more robust terms of trade in the first quarter of this year,” he said. 

He added: “Despite rising oil prices and a higher total import bill, commodity prices have risen to new highs, strengthening income gains to the economy.” 

“With inflation expectations remaining stable, and despite inflation risk increasing, the committee still expects inflation to be contained in 2021 — before rising to around the midpoint of the inflation target range in 2022 and 2023,” the governor said.

 He said policy stance and repurchase rate level remained highly accommodating, and would remain so even with steps taken to normalise interest rate levels in response to rising inflation.

Kganyago said the generally favourable global conditions and strong commodity export prices have led to the appreciation of the local rand currency through the latter half of 2020 and into this year, moving the currency close to its long-run equilibrium level.

“Since the March meeting of the MPC, the rand has appreciated by 4 percet on a trade-weighted basis. The implied starting point for the rand forecast is R14.46 to the US dollar, compared with R14.96 at the time of the previous meeting,” the top banker said.

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