South Africa’s central bank to keep rates at record low
South Africa’s central bank will keep its repo rate on hold next week as inflation remains benign but raise rates early next year to keep prices lower.
Inflation was expected to average 4.4% this year and next, just below the mid-point of the Reserve Bank’s 3% to 6% target range.
Consumer prices in Africa’s most industrialized nation have been going through a disinflationary phase for years before COVID-19 struck the world, but economists have agreed in recent months it had a transitory nature like other economies.
“One of the main differences we believe South Africa has managed to avoid the so-called ‘second round’ impacts of higher commodity prices into inflation is lower wage growth,” said Jeffrey Schultz, economist at BNP Paribas.
However, the third quarter was expected to contract 0.6% on a seasonally adjusted but non-annualised basis due to arson and looting that erupted in July following the jailing of former president Jacob Zuma, as well as a severe third wave of COVID-19 infections.