South Africa holds rate at 7%, says tightening cycle may be near end

By Wendy Van Sickle

Columbus, Ohio, Sept 22 – South African Reserve Bank’s Monetary Policy Committee has unanimously decided to maintain the repurchase rate at 7%.

Headline consumer price inflation fell to within the 3% to 6% target range in August, in line with expectations, the bank said in a notice.

However, inflation is expected to rise in the near term before a sustained return to the target in 2017.

While risks from the global environment persist, volatility in international markets in the wake of the United Kingdom’s Brexit decision has subsided, the bank said. A key risk continues to be the prospect of a resumption monetary policy tightening in the United States.

The consumer price index for all urban areas was measured at 6% in July, then fell slightly to 5.9% in August. It was record at 6.3% in June, 6.1% in May, 6.2% in April and 6.3% in March, after topping out at 7% in February.

The bank’s measure of core inflation, which excludes food, fuel and electricity, remained at 5.7% in July and August.

The bank said it may be close the end of its tightening cycle if current forecasts persist, but that, in order for a policy adjustment, it “would need to see a more significant and sustained decline of the inflation trajectory to within the inflation target range.”

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