South African Reserve Bank: No Rate Change as Expected

May 24, 2012

The 5.5% repurchase rate since November 18, 2010 was left unchanged.  The key central bank interest rate had been cut during the world recession from 12.0% prior to December 2008 to 7.0% by August 2009 and three more times by 50 bps each during 2010.  In leaving monetary policy unchanged again today, the monetary policy committee

  • Noted that April inflation was lower than assumed previously.
  • Revised downward the short-term likely path of inflation due to the lower present level.
  • Projected in-target average inflation of 6.0% this year, 5.5% in 2013, and 5.0% in 2014.
  • Estimated South Africa’s output gap at around 3.5% and said such is unlikely to shrink until next year.
  • Projected rises of GDP of 2.9% this year followed by about 4% per annum in the ensuing two years.
  • Spoke of an uncertain global environment and the need to watch European developments.
  • Identified rand depreciation as a potential upside price risk.

The next interest rate review is set for July 19.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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