SA Reserve Bank expected to keep repo rate unchanged following MPC meeting

The SA Reserve Bank (SARB) is expected to keep the repo rate unchanged at 6.75% on Thursday afternoon.

The repo rate is the interest rate at which the central bank lends money to other banks.

Changes in the repo rate affect the prime lending rate, which is the rate banks use as a starting point to calculate interest rates for their clients. SARB governor Lesetja Kganyago will announce the benchmark rate call at a media briefing in Pretoria on Thursday afternoon, following a three day meeting of the bank's Monetary Policy Committee (MPC).

The bank last hiked rates in November 2018, when the MPC introduced a 25-basis point hike that took the rate to 6.75%. The committee kept rates on hold following scheduled meetings in January and late March.

While headline consumer price inflation (CPI) for April came in at 4.4% - well within the Reserve Bank's target range of between 3% and 6% - analysts suggest the repo rate is likely to stay unchanged due to concerns about inflationary pressure in the future.  

"CPI inflation is projected to average 4.8% year-on-year (y/y) this year, but is set to rise back towards the upper end of the target range in 2020 on low base factors and high administered price increases  - especially electricity," said Kamilla Kaplan of Investec in a note to clients.

"As such, the repo rate is likely to remain on hold at 6.75% at this week’s MPC meeting to account for the higher projected inflation over the forecast horizon."

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