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EXCERPTS-South African central bank comments as rates kept on hold

·2 min read

JOHANNESBURG, July 22 (Reuters) - Below are some quotes from South African Reserve Bank Governor Lesetja Kganyago on Thursday as he announced the central bank's decision to keep its benchmark repo rate at 3.5%.


"The risks to the short-term inflation outlook are assessed to the upside, despite weaker than expected services inflation outcomes in recent months. Rapid global producer price inflation and supply shortages created by disruptions to local transport networks increase these inflation risks. Food price inflation, already very high globally, surprised to the upside in recent months. Petrol, electricity and other administered prices also continue to present short-term risks."

"Given the medium and long-term projections set out above, a weaker currency, higher domestic import tariffs, and escalating wage demands present longer-term upside risks to the inflation forecast."


"Overall, and after revisions, the risks to the medium-term domestic growth outlook are assessed to be balanced. High export prices, stronger household incomes and a somewhat better investment outlook are backed up by generally supportive global conditions, despite ongoing financial volatility. Recent events in the country, their impact on vaccinations, a longer than expected lockdown, limited energy supply and policy uncertainty pose downside risks to growth."

"However, recent unrest and economic damage could have lasting effects on investor confidence and job creation. We estimate the unrest to have fully negated the better growth results from the first quarter, resulting in an unchanged estimate of 4.2% for growth in 2021."


"Despite higher expectations and continued upside risks, the Committee expects inflation to be contained in 2021 and 2022, before rising to around the midpoint of the inflation target range in 2023."

"Against this backdrop, the Monetary Policy Committee (MPC) decided to keep rates unchanged at 3.5% per annum. The decision was unanimous."

"The implied policy rate path of the Quarterly Projection Model (QPM) indicates an increase of 25 basis points in the fourth quarter of 2021 and in each quarter of 2022. These repurchase rate levels reflect a highly accommodative policy stance through the end of 2022, keeping financial conditions supportive of credit demand as the economy recovers from the pandemic and associated lockdowns".

(Reporting by Olivia Kumwenda-Mtambo, Promit Mukherjee and Alexander Winning)