MPC to announce interest rates on Thursday

Economists say the Reserve Bank’s Monetary Policy Committee (MPC) is likely to keep the repo rate unchanged at 3.5% and the commercial lending rate also on hold at 7%.

The MPC’s decision follows the release of the December Consumer Price Inflation (CPI) figures by Statistics South Africa which showed that inflation was the lowest in 16 years.

The average annual inflation rate for 2020 was 3.3%.

Last year, the South African Reserve Bank (SARB) cut the repo rate by 300 basis points down to its lowest level in four decades.

The move was one of a number of efforts made by the bank to mitigate the effects of COVID-19 on consumers.

Independent Economist Elize Kruger says the low inflationary environment offers incentives for the Reserve Bank to keep interest rates unchanged.

“The Reserve Bank’s Monetary Policy Committee will have it’s first meeting on Thursday. On the one side we’ve seen a slight recovery in economic growth, which in the third quarter of 2020 came out higher than expected but on other side we have seen inflation well under control. So, I believe that the Reserve Bank will for the first meeting be conservative and keep interest rates unchanged.”

Chief Economist at Efficient Group, Dawie Roodt says like most economists he expects the Reserve Bank to keep rates unchanged.

“I think that the Reserve Bank has really done enough now to support the economy as much as it can. In fact, I’m starting to get a little being worried about inflation over the next couple of months because there’s a possibility that it could start increasing. So, for now I think the Reserve Bank will most likely leave interest rates unchanged.”

The Monetary Policy Committee’s decision on rates will be delivered during a virtual press conference on Thursday at 3pm.

Source: SABC News (sabcnews.com)