The Reserve Bank expects domestic inflation to be contained at about 4.5% over the next two years in the absence of any shocks, governor Lesetja Kganyago said Wednesday in comments that might cement market forecasts of local interest rates remaining at historic lows.

Inflation expectations appeared well anchored around the midpoint of the central bank’s 3%-6% inflation target range and the picture looked “promising”, Kganyago said. In the wake of the Covid-19 pandemic and lockdown restrictions imposed in 2020, the Bank responded by cutting the repo rate by 275 basis points to the current 3.5%, the benchmark rate’s lowest level in about five decades, as it sought to support an economy that shrank by 7% in 2020 — the worst performance in about a century. ..

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