Johannesburg – The SA Reserve Bank (SARB) on Thursday announced that the repo rate would remain unchanged at 8.25% as inflation tapered off to levels last seen in October 2021.
A day earlier, Stats SA announced that inflation had cooled to 5,4%, finally sinking below the upper limit of the SARB’s monetary policy target range.
The Bureau for Economic Research survey released in July shows average inflation expectations of 6.5% for 2023 (from 6.3% in the first quarter).
Expectations for inflation in 2023 based on market surveys are currently 5.9%, and near-term break-even rates have decreased to around 4.5%.
The SARB on Thursday said longer-term expectations remain elevated.
“While South Africa’s economic conditions appear to have improved, the longer-term outlook mirrors the uncertainty of the global environment. Prices for commodity exports continue to weaken,” the SARB said.
“In addition, energy supply remains unreliable and stronger El Nino conditions threaten the agricultural outlook.”
However, headline inflation returned to the upper end of the inflation target range in June, and is forecast to sustainably revert to the mid-point of the target range by the third quarter of 2025.
“Against this backdrop, the MPC [Monetary Policy Committee] decided to keep the repurchase rate at its current level of 8.25% per year,” SARB Governor Lesetja Kganyago said.
“Three members of the Committee preferred to keep rates on hold and two preferred an increase of 25 basis points.”
This announcement follows 10 consecutive repo rate increases by the MPC.
Kganyago said the next statement of the MPC will be released on 21 September 2023.
