Inflation and retail sales data cement expectations SA Reserve Bank will hold rates steady

Source: Ed Stoddard, Business Maverick, 19 May 2021, photo credit: 123RF/Pop Nukoonrat/Business Live

Inflation in April accelerated sharply to 4.4% in April from 3.2% in March, Statistics South Africa said on Wednesday. This cements the already cast iron expectations that the SA Reserve Bank will keep rates on hold this week.

The SA Reserve Bank’s (Sarb’s) Monetary Policy Committee (MPC) wraps up its bimonthly rates deliberation meeting on Thursday, and the overwhelming expectation among economists is that it will hold its key repo rate steady at 3.5%. The Consumer Price Index (CPI) and retail trade sales data released on Wednesday have all but sealed that case.

First up, the inflation data. They showed CPI gathering pace, reaching 4.4% year on year in April from 3.2% in March. This was its highest read in 14 months, since February of last year, when it hit 4.6% ahead of the Great Lockdown. But this does not, in central bank parlance, point to an “overheating” economy, when demand pressures are huge and full employment is almost reached. That does not even begin to describe South Africa’s economy.
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