South Africa Central Bank Holds Rate Steady

South Africa Central Bank Holds Rate Steady

South Africa’s central bank left the key interest rate unchanged on Thursday, in a split vote, citing downside risks to inflation amid a slow economic recovery.

The Monetary Policy Committee decided to leave the repo rate unchanged at 3.5 percent, South African Reserve Bank Governor Lesetja Kganyago said in a statement.

Two members of the committee preferred a 25 basis point cut, while three preferred to hold rates at the current level.

“The Committee notes that the slow recovery will keep inflation below the midpoint of the target range for this year and next,” Kganyago said.

“Unless risks outlined earlier materialize, inflation is expected to be well contained over the medium-term, remaining below but close to the midpoint in 2021 and 2022.”

The bank forecast consumer price inflation at 3.2 percent this year and lowered the projection for next year to 3.9 percent. Price growth is seen at 4.4 percent in 2022.

The core inflation forecasts were lowered to 3.3 percent for this year and to 3.4 percent for next. The outlook for 2022 was left unchanged at 4.0 percent.

The central bank revised up the third quarter sequential growth forecast to 50.3 percent.

The projection for the full year was revised to -8.0 percent from -8.2 percent predicted in September.

The bank forecast GDP growth of 3.5 percent for next year and 2.4 percent in 2022.

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