The Monetary Policy Committee has decided against changing the repo rate, once again keeping it at 3.5% per annum, said Reserve Bank Governor Lesetja Kganyago.
Speaking during a virtual media briefing on Thursday, Kganyago said the decision was unanimous.
He said policy stance and repurchase rate level remains highly accommodative, and will remain so even with steps taken to normalise interest rate levels in response to rising inflation.
“With inflation expectations remaining stable, and despite inflation risk increasing, the Committee still expects inflation to be contained in 2021, before rising to around the midpoint of the inflation target range in 2022 and 2023,” said the Governor.
Addressing reporters, Kganyago said the MPC now expects the country’s economy to grow by 4.2%, up from 3.8%. This was following an expansion of 6.3% in the fourth quarter of 2020, the Bank’s forecast for South Africa’s first quarter growth stands at 2.7%, much stronger than the 0.2% contraction expected at the time of the March meeting.
“The stronger growth forecast for 2021 reflects better sectoral growth performances and a more robust terms of trade in the first quarter of this year. Despite rising oil prices and a higher total import bill, commodity prices have risen to new highs, strengthening income gains to the economy,” he said.
Kganyago said the generally favourable global conditions and strong commodity export prices have led to the appreciation of the rand through the latter half of 2020 and into this year, moving the currency close to its long-run equilibrium level.
“Since the March meeting, the rand has appreciated by 4% on a trade-weighted basis. The implied starting point for the rand forecast is R14.46 to the US dollar, compared with R14.96 at the time of the previous meeting,” he said.