Reserve Bank keeps rates on hold at 3.5%

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Governor of the SA Reserve bank Lesetja Kganyago.
Governor of the SA Reserve bank Lesetja Kganyago.
  • The Reserve Bank has kept the repo rate on hold at 3.5%.
  • All five members of the Monetary Policy Committee voted to keep rates unchanged, given the view that inflation would remain well-contained in 2021.
  • The bank upwardly revised its GDP forecast for 2021 from 3.6% to 3.8%.


The Reserve Bank has kept the repo rate on hold at 3.5%, in line with economists' expectations.

Governor Lesetja Kganyago made the announcement on Thursday. 

The decision was unanimous as all five Monetary Policy Committee members voted to hold.

The prime rate remains at 7%. 

The rand held steady following the announcement - trading around R14.93 to the US dollar. 

Members see inflation remaining relatively contained into 2021. Inflation is expected to rise to around the midpoint (4.5%) of the target range in 2022 and 2023.

The bank revised its headline consumer inflation forecast to 4.3%, from 4%. The forecast for 2022 was revised lower from 4.5% to 4.4%. "The overall risks to the inflation outlook appear to be balanced," said Kganyago.

The Reserve Bank forecasts first growth to be -0.2%, down from 1%, since the January MPC meeting. However, stronger quarterly outcomes are expected for the remainder of the year. The bank revised its growth forecast for 2021 from 3.6% to 3.8%, having considered possible new waves of Covid-19 infections and constraints to energy supply.

"Getting back to pre-pandemic output levels will take time," said Kganyago. GDP is expected to grow by 2.4% in 2022 and by 2.5% in 2023.

"Economic and financial conditions are expected to remain volatile for the foreseeable future. In this uncertain environment, policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook," Kganyago emphasised.

Commenting on the latest rates decision, Bureau for Economic Research chief economist Hugo Pienaar noted that it is clear the possibility of another interest rate cut is very low. "In the same breath, I do not expect an increase anytime soon," he added.

Chief economist of Old Mutual Investment Group Johann Els expects rates to remain unchanged until the second half of 2022. "I do not think there is a need for interest rate increases until deep into next year," he said.


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