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The Reserve Bank of South Africa (Sarb) decided to keep the buyback rate stable at 3.5% on Thursday, following the conclusion of its final Monetary Policy Committee (MPC) meeting for 2020, a year in which it cut rates. by 300 basis points in total. in the face of the economic crisis of Covid-19.
This is the second consecutive meeting of the MPC in which the bank has chosen to keep the repurchase rate unchanged, a move that most economists widely expected.
It comes as the Sarb signaled the end of its cycle of cuts at its previous meeting in September, despite moderating inflation.
The prime credit rate of commercial banks remains at a minimum of 7% for more than 4 decades.
The decision, announced by Sarb Governor Lesetja Kganyago, follows the three-day meeting of the bank’s MPC in Pretoria.
Two members of the MPC preferred a cut of 25 basis points and three preferred to keep rates at the current level.
Inflation
Kganyago said that consumer price inflation dropped to 3.2% for 2020, 3.9 for 2021 and has not changed for 2022 at 4.4%.
The Bank’s general consumer price inflation forecast was lowered to 3.2% for 2020 (from 3.3%) and 3.9% for 2021 (from 4%), while 2022 remains unchanged at 4.4%. Similarly, the core has shrunk to 3.3% by 2020 (previously 3.4%), 3.4% by 2021 (from 3.7%), and flat at 4% by 2022. pic.twitter.com/tpdm3EOgpJ
– Banco de Reserva SA (@SAReserveBank) November 19, 2020
Increase
The governor said that the easing of the blockade restrictions supported economic growth, “with high-frequency indicators that continue to show a rebound in economic activity during August and September. Growth in the third quarter of 2020 is expected to be 50.3% quarter-on-quarter sarre.
In a surprise move, Kganyago announced that the central bank now expects South Africa’s GDP by 2020 to be -8%. This is slightly better than the bank’s September prediction of an 8.2% contraction.
Image: Serbian
He noted that the country’s terms of trade remain strong, with commodity export prices high, while oil prices remain low overall.
“However, returning to pre-pandemic production levels will take time. The markedly lower investment this year by the public and private sectors will affect growth prospects in the coming years. GDP is now expected to grow 3.5% in 2021 and 2.4% in 2022, “he said.
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On the international front, Kganyago said that accommodative policies in many advanced economies and an improved economic outlook have supported a partial recovery in global financial markets.
“But so far this has resulted in only a trickle of new capital flows to emerging markets, and financing conditions remain uncertain. Instead, South Africa’s high public financing needs have been met with savings from the local private sector and loans from international financial institutions, ”he said.
“Better global economic and financial conditions caused the rand to appreciate by 6.9% from September [MPC] meeting. However, the rand has depreciated 8.7% against the dollar since January and remains below its long-term estimated equilibrium value, ”he added.
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