Relief as Reserve Bank holds rates steady

South Africans breathed a sigh of relief on Thursday as the SA Reserve Bank (Sarb) decided to leave its key repo rate unchanged at 8.25%.

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SA Reserve Bank (Sarb) decided to leave its key repo rate at 8.25%.

After a 20-month low inflation hit for June SA Reserve Bank decides to leave its key repo rate unchanged and means that the prime lending rate of commercial banks remain at 11.75%.

Sarb Governor Lesetja Kganyago announced the decision after the conclusion of the bank’s Monetary Policy Committee (MPC) meeting in July.

The MPC essentially stopped the current rate hike cycle, which has seen 475 basis points (bps) in repo rate rises January 2021, as a result of the previous 10 policy meetings’ quick rate increases. As a result, interest rates are at a 14-year high after the Sarb took action to combat soaring inflation.

The decision to halt rate increases follows official statistics from Stats SA that revealed a significant slowdown in inflation, which has now dropped for three consecutive months.

The 5.4% inflation reading for June is within Sarb’s target range, indicating that the impacts of the central bank’s rate hike cycle are beginning to be seen.

A final 25bp hike was anticipated by the majority of economists and market observers prior to the MPC meeting in July.

Kganyago said the Sarb’s GDP growth forecast is slightly revised upwards to 0.4%, up from its May estimate of 0.3%.

“The headline inflation forecast for 2024 also decreases to 5%, before stabilising at 4.5% in 2025,” 

Lesetja Kganyago, Sarb Governor

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