Sarb keeps repo rate unchanged

The repo rate of the South African Reserve Bank (Sarb) remains unchanged at 8.25%, bank governor Lesetja Kganyago confirmed in a widely expected move on Thursday.

This is the second consecutive time that the Sarb’s Monetary Policy Committee (MPC) has opted to keep rates steady, to the relief of many South Africans and businesses. It means that the prime lending rate of commercial banks remains at 11.75%.

It was a tight call, with Kganyago saying three members of the five-member MPC voting to hold the repo rate, while 2 members voted for a 25-basis point hike.

Read: SA set to hold rates, keep hawkish bias

The MPC took a ‘hold’ decision at its last meeting in July, following an aggressive hiking cycle of a cumulative 475 basis points since late 2021 in the wake of spiking inflation.

Inflation is now within the Sarb’s target range, despite a slight uptick in the latest CPI reading for August, which came in at 4.8% year on year on Wednesday. However, headline inflation in July fell more than expected to a two-year low of 4.7% from 5.4% in June.

With services inflation lower in the near term, headline inflation for 2023 is revised down to 5.9% (from 6.0%). The headline inflation forecast for 2024 increases slightly to 5.1%, before stabilising at 4.5% in 2025. #SARBMPCSEP23 pic.twitter.com/X15lz9NPvg

— SA Reserve Bank (@SAReserveBank) September 21, 2023

With the oil price spiking and the rand remaining under pressure around the R19 to the US dollar mark, the Sarb’s last MPC meeting for the year in November will be closely watched.

“While goods price inflation has eased in much of the world, core inflation remains elevated and oil prices have increased significantly, keeping consumer price inflation from falling further,” Kganyago said on Thursday.

“Globally, monetary policy is likely to remain focused on ensuring inflation continues to retreat,” he added.

In a Q&A media session following the latest MPC announcement, the governor declared that “the job of tackling inflation is not done”.

In his MPC statement, he noted: “With services inflation lower in the near term, headline inflation for 2023 is revised down to 5.9% [from 6%]. The headline inflation forecast for 2024 increases slightly to 5.1%, before stabilising at 4.5% in 2025.”

However, Kganyago warned that the risks to the inflation outlook are still “assessed to the upside”.