South African Reserve Bank (Sarb) Governor, Lesetja Kganyago announced that its Monetary Policy Committee (MPC), decided to keep the repo rate unchanged at 3.5%.
The widely expected decision was made on Thursday following the bank’s 3-day MPC meeting in Pretoria.
The decision to hold rates is in line with the Sarb’s continued monetary policy steps to mitigate the economic fallout of the Covid-19 pandemic.
Since the November meeting of the MPC, a second wave of Covid-19 infections has peaked in South Africa similar to other countries.
Kganyago said that the waves of infection “will continue until vaccine distribution is widespread and populations develop sufficient immunity to curb virus transmission.”
The Sarb expects growth in the first quarter of 2021 to remain muted following significant decreases in GDP in 2020. The MPC expects the growth rate for 2020 to be -7.1%, compared to the
contraction of 8% expected at the time of the November meeting.
“New waves of the Covid-19 virus are likely to periodically weigh on economic activity both globally and locally. In addition, constraints to the domestic supply of energy, weak investment and uncertainty about
vaccine rollout remain serious downside risks to domestic growth,” Kganyago said.