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 gapWhile 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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