(3 minutes read)
· The SA Reserve Bank’s monetary policy committee (MPC) kept the interest rates on hold for a third time in a row when it met for discussing the policy
· The committee was split by a single vote in favor of maintaining the interest rate status quo
· Interestingly, the Bank was more upbeat about growth, revising its forecasts for GDP growth in 2021 to 3.6% and predicting an expansion of 2.4% in 2022
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The SA Reserve Bank’s monetary policy committee (MPC) kept the interest rates on hold for a third time in a row when it met for discussing the policy. The committee was split by a single vote in favor of maintaining the interest rate status quo.
Committee voted 3-2 to keep the repo rate at a record low of 3.5% .Some analysts supported a cut in interest rates to support an economy that is reeling from Covid-19 and renewed lockdowns. Also, according to the Bank’s own admission that the inflation would stay comfortably within its 3%-6% target range gave rise to the speculation that there would be a further cut in the rate as expected by a large segment of industry. In earlier two occasions also immediately preceding this meeting, the casting vote was against an interest rate cut.
Interestingly, the Bank was more upbeat about growth, revising its forecasts for GDP growth in 2021 to 3.6% and predicting an expansion of 2.4% in 2022. That is up from November’s forecasts of 3.5% in 2021 and 2.4% in 2022.
Reserve Bank had been very aggressive in the reduction of the interest rates and brought down it by 300 basis points during 2020. However, it is yet to be seen how it kicked up the real economic activities as monetary policy action takes between 12 and 18 months to filter down.
