The Reserve Bank’s decision to leave its repo rate unchanged at 7% per annum at the conclusion of its monetary policy meeting today is no surprise.
Inflation has improved
The inflation outlook has improved with inflation expected to peak lower (6,7% in 4Q16) and to return to below 6% earlier (2Q17) than previously forecast and final domestic demand, especially private sector fixed investment, is very weak. The currency has also appreciated through the year, which helps to anchor the inflation outlook. Meanwhile, inflation expectations, an important consideration for the Bank, appear to be reasonably well anchored even though at the top end of the Bank’s inflation target range of 3% to 6%.