Reserve Bank Governor Lesetja Kganyago says the country’s economic growth rate has now been revised down to 5.2% from 5.3% due to the impact of the July unrest and other factors.
Kganyago says the unrest coupled with the pandemic and the ongoing energy supply constraints are likely to have lasting effects on investor confidence and job creation.
Kganyago announced that the repo rate would be increased by 25 basis points to 3.75% effective from 19 November.
“High export prices are expected to fade, perhaps faster than previously expected. Very weak job creation will moderate household consumption. Investment will remain constrained by the high risk of further load shedding and ongoing uncertainty. Although fiscal risk has eased, financing conditions remain volatile and the yield curve for rand-denominated bonds remains steep.”
Kganyago says economic recovery in emerging markets continues to be negatively affected by the slower pace of coronavirus vaccinations.
Interest Rate announcement:
The bank says a weaker currency, higher domestic import tariffs, and escalating wage demands present further upside risks to the inflation forecast.
Kganyago says the Monetary Policy Committee believes a gradual rise in the repo rate will be sufficient to keep inflation expectations well anchored.
“Global producer price and food price inflation continue to surprise higher in recent months and could do so again. Oil prices have increased sharply with current prices well above our forecasted levels for this year. Electricity prices are over the forecast and with other administered prices continuing to present short and medium-term risks.”