South Africa’s central bank faces the difficult task of ensuring that its fight against inflation does not tank the economy. <\/p>\n\n\n\n
South African consumers were given some relief last week when the South African Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC) held interest rates where they were – keeping the repo rate at 8.25% after ten consecutive rate hikes. <\/p>\n\n\n\n
The MPC kept rates on hold as inflation eased, with Consumer Price Inflation dropping from 6.3% in May to 5.4% in June. This was in the SARB’s target range of 3%-6%. <\/p>\n\n\n\n
However, Governor Lesetja Kganyago strongly indicated that South Africa has not reached the end of its rate hiking cycle, with the SARB still looking to see what will happen with inflation. <\/p>\n\n\n\n
Deloitte’s South Africa economic outlook for July said that the SARB will have a hard job ensuring that its fight against inflation does not limit economic growth. <\/p>\n\n\n\n
“While the tighter-for-longer policy is likely to support the further easing of inflation, it could potentially delay any significant uptick in growth,” the outlook said. <\/p>\n\n\n\n
“In the light of this, the Reserve Bank has to walk a tightrope of finding the right balance between stabilizing prices, which would reduce pressure for low-income households, and helping with stimulating economic growth through lower interest rates<\/strong> in an economic environment subject to a range of challenges, most notably deep structural constraints to growth.” <\/p>\n\n\n\n