The South African Reserve Bank held its key interest rate and cut its economic-growth forecast for the year as it sees inflation pressures subsiding.
The Monetary Policy Committee decided to maintain the repurchase rate at 6.75 percent, Governor Lesetja Kganyago said Thursday from the capital Pretoria. The decision was in line with expectations of all 25 economists in a Bloomberg survey. Two of the five MPC members voted for a 25 basis-point reduction in the rate.
Key Insights
The MPC reduced its economic-growth outlook for this year to one percent from 1.3 percent as the deepest power cuts in more than a decade weighed on output in the first quarter. It joined Economists including HSBC Global Research’s David Faulkner in saying that the economy probably contracted during the three months through March.
Africa’s most-industrialized economy hasn’t grown by more than two percent a year since 2013.
The MPC’s quarterly projection model now sees one reduction of 25 basis points in the key rate by the end of 2021.
Until Thursday, no member of the MPC had voted to cut the key rate since March 2018 as the committee seeks to anchor price-growth expectations close to the 4.5 percent midpoint of its target band to allow for flexibility in protecting the economy from price shocks.
The bank sees inflation averaging 4.5 percent this year compared with a previous estimate of 4.8 percent in March. A downward revision to its forecast for core inflation forecast — which excludes the cost of food, non-alcoholic beverages, fuel and electricity — offset an increase in its oil-price assumption.
Kganyago named Chris Loewald, who is head of economic policy development and research at the bank, as a member of the MPC. The bank is still in need of a third deputy governor after Francois Groepe resigned in January.
Heads of the bank are named by the president, in consultation with the finance minister.
