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South African Reserve Bank to maintain repo rate through 2021

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The Reserve Bank governor Lesetja Kganyago will hold rates steady in January

South Africa’s Reserve Bank will maintain its repo rate at a record low of 3.5 percent at its January 21 meeting and for the rest of the year, media reports said. This is taking place at a time when the coronavirus is peaking again and inflation is expected to be benign. 

It is reported that the Reserve Bank governor Lesetja Kganyago will  hold rates steady in January. This is after the interest rates were cut at a cumulative 300 basis points last year, in the midst of the pandemic. 

According to media reports, “The SARB will remain accommodative for longer. As disinflation risks should prevail in 2021, accommodative monetary policy will be the only available option to offset tighter fiscal policy,” Alexey Pogorelov in a Credit Suisse note said. Inflation was much weaker in 2020 compared to the previous years.

South Africa’s economy is expected to grow 3.5 percent in 2021, following a 7.4 percent contraction as predicted last December. That said, the economy is forecast to grow 2 percent next year. 

The coronavirus cases in South Africa spiked to 20,000 in the past week. With that, it has surpassed levels recorded in the first wave of the coronavirus. Policy uncertaining in the country can be addressed through the following measures: access to vaccinations; cutting borrowing costs; making tough political and economic decisions. The strong performance of the agricultural sector and certain commodity exports will help drive growth, media reports said. These two aspects are considered to be the bright spots of South Africa’s economy.

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