Reserve Bank holds repo rate at 3.5%, while analysts say market conditions favour further loosening | Citypress

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Reserve Bank holds repo rate at 3.5%, while analysts say market conditions favour further loosening The Reserve Bank’s decision is in line with market expectations, although some analysts say market conditions were ripe for further loosening

SA Reserve Bank governor Lesetja Kganyago told South Africans that two members of the committee preferred a 25-basis point cut and three preferred to hold rates at the current level.

He said local food price inflation was high but expected to remain broadly contained, adding that the committee also noted the significant but likely temporary reduction in medical insurance price inflation this year. Kganyago said despite an upward revision to potential growth, higher growth in 2020 and 2021 implied a small narrowing of the output gap over the forecast period, compared with the November meeting.

However, the global distribution of vaccines is likely to be slow, creating an uneven pace of global economic recovery in 2021, Kganyago warned. “Global growth, vaccine distribution, a low cost of capital and high commodity prices are supportive of growth. However, new waves of Covid-19 are likely to periodically weigh on economic activity both globally and locally.”

 

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