AIRLINK 63.43 Increased By ▲ 0.23 (0.36%)
BOP 5.46 Increased By ▲ 0.06 (1.11%)
CNERGY 4.68 Increased By ▲ 0.11 (2.41%)
DFML 19.02 Decreased By ▼ -0.71 (-3.6%)
DGKC 70.29 Increased By ▲ 1.29 (1.87%)
FCCL 19.12 Increased By ▲ 0.87 (4.77%)
FFBL 30.86 Increased By ▲ 1.47 (5%)
FFL 9.58 Increased By ▲ 0.27 (2.9%)
GGL 10.16 No Change ▼ 0.00 (0%)
HBL 109.20 Decreased By ▼ -0.86 (-0.78%)
HUBC 127.70 Increased By ▲ 1.69 (1.34%)
HUMNL 6.85 Increased By ▲ 0.12 (1.78%)
KEL 4.39 Decreased By ▼ -0.08 (-1.79%)
KOSM 4.43 Decreased By ▼ -0.02 (-0.45%)
MLCF 37.39 Increased By ▲ 0.79 (2.16%)
OGDC 128.50 Increased By ▲ 0.20 (0.16%)
PAEL 22.80 Decreased By ▼ -0.39 (-1.68%)
PIAA 26.50 Increased By ▲ 0.30 (1.15%)
PIBTL 6.19 Increased By ▲ 0.19 (3.17%)
PPL 112.52 Decreased By ▼ -0.28 (-0.25%)
PRL 26.85 Decreased By ▼ -0.30 (-1.1%)
PTC 16.75 Decreased By ▼ -0.34 (-1.99%)
SEARL 60.72 Decreased By ▼ -1.37 (-2.21%)
SNGP 65.35 Increased By ▲ 1.40 (2.19%)
SSGC 11.05 Increased By ▲ 0.02 (0.18%)
TELE 9.10 Decreased By ▼ -0.13 (-1.41%)
TPLP 11.28 Increased By ▲ 0.28 (2.55%)
TRG 69.85 Decreased By ▼ -1.10 (-1.55%)
UNITY 23.65 Decreased By ▼ -0.30 (-1.25%)
WTL 1.31 Decreased By ▼ -0.07 (-5.07%)
BR100 7,280 Increased By 64.2 (0.89%)
BR30 23,637 Increased By 105.1 (0.45%)
KSE100 70,315 Increased By 694.7 (1%)
KSE30 23,132 Increased By 221.5 (0.97%)
Business & Finance

South African central bank holds rates, but ready to act on inflation

  • The unanimous decision by policymakers was in line with market forecasts, but the more hawkish tone struck by Reserve Bank (SARB) Governor Lesetja Kganyago was a noteworthy change.
  • Headline consumer price inflation increased to 4.4% year-on-year in April, a touch shy of the mid-point of the bank's target range of 4.5%, and its highest level since February last year, data showed on Wednesday.
Published May 20, 2021

JOHANNESBURG: South Africa's central bank kept support for an economic recovery in place on Thursday, leaving lending rates unchanged for a fifth meeting in a row, but said upside inflation risks were beginning to emerge.

The unanimous decision by policymakers was in line with market forecasts, but the more hawkish tone struck by Reserve Bank (SARB) Governor Lesetja Kganyago was a noteworthy change.

Kganyago said recent spike in consumer prices was temporary, but that the bank would not hesitate to tighten policy if it became permanent.

"Our analysis at the moment is that (the rise in inflation) it's transitory," Kganyago said during a virtual media conference. "Of course if inflation does surprise we stand to act as appropriate to make sure that balance is restored".

Headline consumer price inflation increased to 4.4% year-on-year in April, a touch shy of the mid-point of the bank's target range of 4.5%, and its highest level since February last year, data showed on Wednesday.

At the meeting the bank trimmed its forecast for consumer price-growth in 2021, to an average of 4.2% from 4.3% in March. It left forecasts for CPI in 2022 and 2023 unchanged, at 4.4% and 4.5% respectively.

By leaving the repo rate unchanged at 3.5%, the bank has now gone more than a year since it delivered the first of 375 basis points of rate cuts to combat the impact of the as coronavirus pandemic. And while the easing cycle has ended, hikes remain unlikely in 2021, analysts said.

"Despite a unanimous 5-0 vote to keep the repo unchanged, the hawkish tilt - important when it becomes necessary to raise rates - should not be dismissed," said Razia Khan, Chief Africa economist at Standard Chartered.

The rand, which has traded around 16-month best this month, firmed in response to the decision, hitting a session-high 13.9975 per dollar.

On the economy, the bank raised its growth forecast for the year to 4.2% from 3.8% previously, citing favourable global conditions and firmer terms of trade spurred by strong commodity export prices.

South Africa's economy, already in recession before the pandemic struck, contracted by a record 7% in 2020, but recent data has pointed to a faster than expected recovery.

Governor Kganyago, however, warned it was too early to call the current upswing in commodity prices a super-cycle.

He added that the huge current account and trade surpluses enjoyed by South Africa over the past year would likely switch to deficits in 2022.

Comments

Comments are closed.