November 29, 2020

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Getting back to pre-pandemic output levels will take time, says Kganyago.

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The South African Reserve Bank (Sarb) Governor Lesetja Kganyago on Thursday 19 November 2020 announced that the repurchase rate would remain unchanged at 3.5%

The Monetary Police Committee(MPC) based its decision on the fact that the slow economic recovery would keep inflation below the midpoint of the target range for this year and next.

“Unless risks outlined earlier materialise, inflation is expected to be well contained over the medium-term, remaining below but close to the midpoint in 2021 and 2022. Against this backdrop, the MPC decided to keep rates unchanged at 3.5% per annum.” Kganyago said

Sarb governor Lesetja Kganyago

However not all committee members agreed, two members preferred a 25 basis point cut and three preferred to hold rates at the current level.  

Kganyago stated that since the committee’s September meeting, it had become clear that Covid-19 infections would occur in waves of higher and lower intensity, caused in large part by pandemic fatigue and lapses in safety protocols. The new infections could see the re-imposition of lockdowns.

The Nelson Mandela Bay Metro is now a hot spot after an increase of 903 news cases in 24 hours.

The Eastern Cape’s Health Department has since launched an intensified testing and tracing programme in the metro. Eastern Cape MEC for Health, Sindiswa Gomba, launched a rapid 20-minute test that is intended to strengthen efforts to track and trace Covid-19 patients.

“ Fresh spread of the virus and reimposed lockdowns will extend the time needed for economies to get back to pre-pandemic activity level,” He added.

Sarb governor Lesetja Kganyago

 The governor added that despite developments of successful vaccine trials, global distribution of vaccines is likely to be slow, resulting in a modest pace of global economic growth into 2021.

He revealed that the International Monetary Fund (IMF) now expected global gross domestic product (GDP) to contract by about 4.4% this year.

Kganyago stated that in as much the Monetary policy had eased financial conditions and improved the resilience of households, the policy however could not on its own improve the potential growth rate of the economy or reduce fiscal risks.