South African Reserve Bank

May 24, 2018

A 25-basis point cut of the SARB repo rate to 6.50% in March had been the second such move since last July but was approved by only a thin 4-3 vote of the central bank’s monetary policy committee. Insofar as core inflation rose 0.4 percentage points in April to 4.5%, it was not surprising that officials left the repo rate unchanged at this week’s policy review, and this time the vote was unanimous. In a released statement, officials concede that the balance of risks surrounding the inflation outlook has tilted a little more to the upside. “the resurgent US dollar and higher US long-bond yields have led to sharply lower capital flows to the emerging markets. These developments, coupled with persistently rising international oil prices, have contributed to the
reversal of some of the recent rand strength.”

Officials pledge to “maintain vigilance to ensure that inflation remains well within the inflation target range, and [they promise to] adjust the policy stance should the need arise.” The following forward guidance is added: “The implied path of policy rates generated by the SARB’s Quarterly Projection Model reflects one increase of 25 basis points during the final quarter of this year and a similar increase in mid-2019. Two further increases are indicated in 2020.”

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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