The South African Reserve Bank Continues its Rate Hike Pause

SOUTH AFRICA - Report 22 Sep 2016 by Iraj Abedian

The South African Reserve Bank’s Monetary Policy Committee has once again decided to keep the benchmark interest rate at 7%. This marks the third consecutive time that the SARB did not change the repo rate since increasing it during the MPC’s March 2016 meeting. The prime lending rate has also effectively remained at 10.5%.
The decision to not increase the repo rate amid the still relatively high inflation environment came after the latest inflation figures showed that inflation had reverted back into the SARB’s inflation target band of 3 – 6% by recording 5.9% on a year-on-year basis during August 2016. Headline CPI had breached the upper band of this target range during January 2016, then peaked at 7% in February, which means that August was the first month in the current year during which inflation was within target. To further support its reasons for maintaining a rate hike pause, the SARB indicated that its latest inflation forecast showcased improved metrics over the first four quarters of its forecast horizon.

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