PPS Investments: MPC Media commentary
The Monetary Policy Committee (MPC) decided to leave the repo rate unchanged at 3.5%. This was a unanimous decision even after the recent increases to inflation, above the midpoint of the inflation target band.
The recent unrest in South Africa was noted as a concern to economic growth after the strong GDP print of 4.6% in the first quarter of the year. This directly affected the expected GDP growth for 2021 which now remains unchanged at 4.2% and at 2.3% in 2022 and 2.4% in 2023. The SARB’s 2021 forecast for global GDP growth is 6.1%, slightly higher than the 6.0% IMF forecast and 4.4% and 3.4% for 2022 and 2023 respectively. The slower vaccine roll-out in emerging economies is therefore expected to influence GDP growth for the region.
Although inflation has seen a recent uptick in South Africa, the expectation is only slightly higher in 2021, lower in 2022 and unchanged in 2023. Inflation expectation for 2021 is 4.3%, up from 4.2% and 4.2% in 2022, up from 4.4%, while remaining 4.5% in 2023. The SARB’s quarterly projection model suggests a 25-basis point increase in the last quarter of this year and a similar size increase in each quarter of 2022 on the back of recent price increases to food and fuel prices. This is however used as a guide and interest rate decisions will be assessed as new information is available.
The transparency and consistency of the SARB’s decision making process is to be commended as it provides a firm base for investment decision making in an uncertain economic environment.
About PPS Investments
PPS Investments, established in 2007 is the investment manager within the 80-year-old PPS Group, South Africa’s largest multidisciplinary society of graduate professionals with around 150 000 members. PPS Investments offers a comprehensive range of competitive investment solutions designed to empower investors at all life stages to plan, protect and provide for their financial goals. Having been the forefront of progressive, transparent investments since inception, the dynamic asset manager carefully designs its investments with the input and feedback from the graduate professional market – a client centric approach which both graduate professionals and general investors can benefit from. Its flagship is the PPS Portfolio range which offers diversification across optimally combined, complementary asset managers. PPS Group is mutual financial services company and shares 100% of its profits with its members. Thus, when PPS members invest with PPS Investments, whether in its single- or multi-manager funds, qualifying members benefit from increased profits into the PPS Profit-Share Account. https://www.pps.co.za/invest
By Luigi Marinus, Portfolio Manager at PPS Investments
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