The South African Reserve Bank keeps rates unchanged despite the stronger economy

SOUTH AFRICA - Report 24 Sep 2021 by Iraj Abedian

Continuing with its trend of not altering interest rates since it cut them by 25 basis points at its July 2020 meeting, the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) once again voted to leave the benchmark interest rate unchanged at 3.5%. With the repo rate at 3.5%, the prime lending rate also remains at 7%.

The latest inflation figures released by Statistics South Africa (Stats SA) indicate that annual consumer price inflation (CPI) accelerated from 4.6% y/y in July to 4.9% y/y in August 2021. This means that the inflation rate is 1.7 percentage points higher than it was at the beginning of the year. Despite this, it remains within the Reserve Bank’s inflation target range of 3%-6%, although placing the inflation rate further above the Bank’s preferred target of 4.5%, i.e., the mid-point of the target range. August marked the fourth consecutive month during which the annual change in the consumer price index was above the mid-point.

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