South African Reserve Bank Keeps 5.0% Repo Rate
March 20, 2013
After sifting through a complexity of cross-currents, the Monetary Policy Committee called the current stance “appropriately accommodative. Note was made in a newly released statement that
- Growth is weak, and its outlook is fragile.
- The current account is wider.
- Difficult labor relations have fed high unemployment.
- Headline and core inflation rose sharply last month to 5.9% and 5.3%. Food prices are high, and rand depreciation poses the main inflation risk. February’s acceleration from 5.4% inflation in January was spearheaded by medical costs. Price risks are skewed to the upside, in contrast to risks for growth.
South Africa, like many economies, has a significantly negative output gap. While inflation is apt to exceed the central bank’s 3-6% target, such is projected to crest in the third quarter and recede to 5.2% by end-2014.
The next policy review is scheduled for May 23. SARB’s repo rate has been at a multi-decade low of 5.0% since last year’s singular rate reduction of 50 basis points in July. That had been the first rate change since 2010. Cuts in 2009-10 accrued to 650 bps from a prior high of 12.0%.
Copyright 2013, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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