SA Reserve Bank expected to keep repo rate unchanged following MPC meeting

The SA Reserve Bank (SARB) is expected to keep the repo rate unchanged at 6.75% on Thursday afternoon.

The repo rate is the interest rate at which the central bank lends money to other banks.

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Changes in the repo rate affect the prime lending rate, which is the rate banks use as a starting point to calculate interest rates for their clients. SARB governor Lesetja Kganyago will announce the benchmark rate call at a media briefing in Pretoria on Thursday afternoon, following a three day meeting of the bank's Monetary Policy Committee (MPC).

The bank last hiked rates in November 2018, when the MPC introduced a 25-basis point hike that took the rate to 6.75%. The committee kept rates on hold following scheduled meetings in January and late March.

While headline consumer price inflation (CPI) for April came in at 4.4% - well within the Reserve Bank's target range of between 3% and 6% - analysts suggest the repo rate is likely to stay unchanged due to concerns about inflationary pressure in the future.  

"CPI inflation is projected to average 4.8% year-on-year (y/y) this year, but is set to rise back towards the upper end of the target range in 2020 on low base factors and high administered price increases  - especially electricity," said Kamilla Kaplan of Investec in a note to clients.

"As such, the repo rate is likely to remain on hold at 6.75% at this week’s MPC meeting to account for the higher projected inflation over the forecast horizon."