Following the South African Reserve Bank’s decision to keep interest rates unchanged, FNB will maintain its prime lending rate at 7 percent. Picture: Bloomberg
Following the South African Reserve Bank’s decision to keep interest rates unchanged, FNB will maintain its prime lending rate at 7 percent. Picture: Bloomberg

FNB maintains 7% prime lending rate after SARB interest rates decision

By Staff Reporter Time of article published Jan 21, 2021

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DURBAN - Following the South African Reserve Bank’s (SARB) decision to keep interest rates unchanged, FNB will maintain its prime lending rate at 7 percent.

FNB will review its position after the next SARB Monetary Policy Committee meeting in March 2021.

Commenting on the MPC announcement, Chief Economist at FNB, Mamello Matikinca-Ngwenya said, “While the SARB may have decided to keep the repo rate unchanged at 3.5 percent, we believe there is room for further easing. The current economic shock has kept demand in the economy very low, and as a result, inflation has remained firmly anchored below the midpoint of the target band. While expected to tick up in the coming months (mainly pushed up by food, electricity, and water prices), inflation should remain well contained over the medium term. We expect inflation to average 3.8 percent in 2021 on the back of lower insurance and rental inflation.”

“High-frequency data shows that while the economy continued to expand into 4Q20, the recovery trend was losing steam. Importantly, these trends emerged before the implementation of level 3 lockdown restrictions in December. This is in line with our expectation of a moderate rebound in SA’s GDP growth (around 3.2% y/y this year), from a deep contraction (around -7.2 percent y/y) in 2020. Risks to this view are a third wave of the virus, which will lead to further lockdown measures and frustrations to rolling out vaccines,” concluded Matikinca-Ngwenya.

BUSINESS REPORT ONLINE

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