The Reserve Bank\u2019s monetary policy meeting will take place on Thursday (25 March), with South Africa’s repo rate expected to be maintained at a record low according to analysts.<\/p>\n
In a research note on Tuesday (23 March), Nedbank economists said that the focus of the meeting will be on the anticipated inflation outlook and the SARB\u2019s economic growth forecasts relative to potential output.<\/p>\n
“Inflation is expected to gradually edge higher in 2021, off the low base established in 2020. We expect inflation to average around 4.5% over the next three years,” Nedbank said.<\/p>\n
It added that the\u00a0SARB\u2019s inflation forecasts presented in January will probably be revised upwards, mainly due to global oil price developments since the last meeting.<\/p>\n
“Furthermore, the output gap is likely to narrow in the years ahead as the economy recovers from the pandemic’s shock. The MPC has indicated that monetary policy is already stimulatory and reiterated that only significant structural reforms could lift growth and employment.”<\/p>\n
Nedbank said that a\u00a0further 25 basis-points-rate-cut is also unlikely to add any further meaningful stimulus given that the yield curve remains extremely steep as investors are pricing in South Africa’s higher risk premium due to the dismal fiscal position at the longer end of the curve.<\/p>\n
Based on all these considerations, Nedbank said that rates are likely to remain unchanged.<\/p>\n