South Africa's repo rate is set and reviewed at MPC meetings. The timetable for meetings is finalised before the beginning of each year. The general public is therefore aware of the meeting dates of the MPC well in advance. Should the need arise, however, the MPC can convene unscheduled meetings. Economic developments are monitored continuously between meetings, particularly those developments that can have a direct impact on inflation and, therefore, on the monetary policy stance. Members of the MPC receive frequent briefing updates and consider research outputs from various domestic and international sources.
Preparation for scheduled meetings of the MPC commences three to four weeks before the date of the meeting, when members of the GEC consider the assumptions for forecasting inflation. A “suite of econometric models” is used for the purpose of forecasting inflation. Although great emphasis is placed on the forecast, it should be noted that there is no mechanical relationship between the forecast and monetary policy decisions. While forecasting is a tool used to assist with monetary policy decision-making, the final decision about the level of, and changes to, the repo rate is not based simply on the forecast.
In reaching its interest rate decision, the MPC considers various factors that influence inflation, for example:
- changes in administered prices;
- changes in wages, productivity and unit labour cost;
- components of domestic and external demand;
- exchange rate developments;
- money supply and credit extension;
- oil prices; and the expected output gap (the gap between actual and potential output).
The MPC has no level or target for any of these variables and the rate of inflation is the benchmark for monetary policy decisions. Decisions are made by consensus. The decision of the MPC is announced at a media conference, which is televised with a simultaneous webcast on the SARB website, and in a media statement.