Reserve Bank expected to keep interest rates at record lows

The South African Reserve Bank (SARB) is anticipated to keep interest rates at historic lows this month, data from a new Reuters poll shows.

South Africa’s Monetary Policy Committee (MPC) will meet for the first time in 2021, next Thursday (January 21).

A Reuters poll out Thursday, showed that 17 of 20 economists believe that Reserve Bank governor Lesetja Kganyago will keep the repo rate at 3.50% for the remainder of 2021, as Covid-19 continues to batter global economies.

The remaining three analysts forecast a 25 bps cut.

Inflation, which turned much weaker last year compared to previous years, is expected to average 3.8% this year, lower than the midpoint of the Reserve Bank’s comfort range of 3-6%, Reuters said.

Bloomberg noted that the MPC halted its cutting cycle after easing by 275 basis points since March, when the country’s first virus case was confirmed. Its projection model now indicates two increases of 25 basis points each in the second half of 2021.

The MPC, it said, continues to emphasize future decisions will be data-dependent. “That means any significant shocks to the economy from the second wave of the pandemic could see it push out the hikes and hold the benchmark rate, especially if it trims its inflation forecast further.”

Uncertainties over the outlook for the economy and price growth also mean the panel hasn’t “closed the door” on rate cuts, deputy governor Fundi Tshazibana said in November.

The central bank has said it would continue buying government bonds in the secondary market if more dysfunctionality arises – and the risks posed by the pandemic means it’s too early to talk about unwinding its holdings.

“The South African Reserve Bank has cut rates by 275bps in response to the Covid-19 crisis and sees this as enough for now. It is now looking to a gradual normalisation of rates, but has kept the door open for more easing,” Bloomberg Economics said.

“We think a choppy recovery will force the SARB to push back the two rate hikes it has signalled for 2H21, with rates staying on hold through 2021.”

The country’s economy is expected to grow 3.5% in 2021, a poll conducted by Reuters showed, growing 2.0% in 2022. Figures from the World Bank, puts growth at 3.3% in 2021, before softening again to 1.7% in 2022.


President Cyril Ramaphosa meanwhile has announced that government will deploy a comprehensive vaccination strategy that aims to reach all parts of the country.

Addressing the nation on Monday on the country’s progress in containing the Covid-19 pandemic, the president described the task as the “largest and most complex logistical undertaking in our country’s history”.

The president said the country was in the process of procuring vaccines through three channels: through the World Health Organisation’s COVAX facility, through the African Union’s vaccine initiative and through direct engagements with vaccine manufacturers.

“South Africa is part of the global COVAX facility, in which countries pool their resources to support the development of vaccines with a view to ensure that all countries receive an equitable supply of effective vaccines,” he said.

The country is expected to receive vaccine doses for around 10% of the population through COVAX.

While there are several promising negotiations with a number of different manufacturers that are yet to be concluded, South Africa has to date secured 20 million doses to be delivered mainly in the first half of the year.

Government will make further announcements as it concludes negotiations with vaccine manufacturers, the president said.

Read: Expect a big drop in living standards in South Africa: World Bank

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