The South African Reserve Bank\u2019s Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 3.5%.<\/p>\n
In a statement on Thursday afternoon (25 March) Reserve Bank governor Lesetja Kganyago said the decision to hold the rate was unanimous among MPC members.<\/p>\n
However, he said that further rate hikes could be on the cards later in 2021 based on projection models.<\/p>\n
“The implied policy rate path of the Quarterly Projection Model indicates an increase of 25 basis points in each of the second and fourth quarters of 2021,” he said.<\/p>\n
“Compared to the previous meeting, the shift in the rate path from the third to the fourth quarter is due to somewhat lower inflation in 2022.”<\/p>\n
Kganyago added that the\u00a0overall risks to the inflation outlook appear to be balanced.<\/p>\n
A more appreciated nominal exchange rate in recent months, and generally low pass-through, is expected to continue to moderate some inflationary pressure, he said.<\/p>\n
“While global food price inflation remains high, local food price inflation is slightly lower than previously expected and should remain broadly contained due to higher local crop production.<\/p>\n
“Oil prices have increased sharply this year and are expected to remain at these levels over the forecast horizon.”<\/p>\n
Kganyago said that electricity and other administered prices remain upside risks to the inflation trajectory.<\/p>\n
While there are no demand side pressures evident at present, higher growth in 2021 and no change in the potential growth rate implies a narrowing of the output gap over the forecast period, compared to the January meeting, he said.<\/p>\n
“Unless the risks outlined earlier materialise, inflation is expected to be well contained in 2021, before rising to around the midpoint of the inflation target range in 2022 and 2023.”<\/p>\n
Property sector welcomes unchanged rates\u00a0<\/strong><\/p>\n Dr Andrew Golding, chief executive of the Pam Golding Property group, said that the decision to hold rates was largely expected and is expected to benefit homeowners.<\/p>\n \u201cThis means that the prime lending rate remains steady at a near 50-year low of 7% with indications that it is unlikely to dip further, so for potential homeowners, it is a reminder that if you are thinking of buying a home, now would be a good time to secure an attractive interest rate.<\/p>\n Economists in the main argued that interest rates are currently at the correct level given the prevailing economic environment.<\/p>\n From a residential property perspective, last year\u2019s aggressive rate cuts have fuelled home buying to a large degree, with 2020 surprising many by showing robust home-buying activity. In fact, according to FNB, 2020 registered the highest volume of mortgage approvals in South Africa in more than a decade.<\/p>\n “While the economy is expected to rebound this year, the robust growth rate forecast will largely be the result of comparisons to last year\u2019s exceptionally weak levels,” Golding said.<\/p>\n
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