SARB poised to keep interest rates on hold as inflation quicken

Johannesburg – The South African Reserve Bank (SARB) is expected to keep interest rates on hold in the fourth quarter, despite an uptick in fuel prices and municipal tariffs pushing inflation to a four-month high in July.

Statistics South Africa (StatsSA) said on Wednesday that inflation quickened to 3.2% year on year, from 2.2% in June as lockdown restrictions continued to ease.

StatsSA said the consumer price index (CPI) inched up 1.3% month on month in July – the biggest monthly rise since February 2016, when the rate was 1.4%.

It also said the monthly move in July was driven largely by fuel prices and municipal tariffs.

“Despite these increases, fuel was still 6.2 percent cheaper this July than it was in the same month last year,” said StatsSA.

Last month, SARB reduced the repo rate by 25 basis points, taking it to 3.5% a year and said it had scope to provide further monetary policy easing with another repo rate cut in the fourth quarter.

The central bank added that the overall risks appeared to be balanced, as local food price inflation was expected to stay contained.

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