Economists disappointed by unchanged repo rate

Some economists say the low inflation outlook presented the South African Reserve Bank (SARB) with an opportunity for further monetary easing.

The bank has decided to keep the repo rate unchanged at seven percent.

It has already cut the prime lending rate by 300 basis points this year as the economy grapples with the impact of the COVID-19 pandemic and the lockdown.

Old Mutual economist Johan Els says a further cut would have made a huge difference.

“This is a disappointing decision given how they have revised their own forecast, one that does not make sense. At this point any little bit helps on the margin. This would have helped consumers and it would have boosted business and investor confidence. There is no inflation pressure, I am more worried about deflation than inflation,” explains Els.

Reserve Bank Governor Lesetja Kganyago says gross domestic product (GDP) is expected to grow by 3.9% in 2021 and 2.6% in 2022 after a substantial contraction in 2020 linked to the coronavirus lockdown.

The economy contracted by 51%, annualised, in the second quarter of 2021.

In the video below, Governor Lesetja Kganyago announces interest rate decision:

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