The South African Reserve Bank (SARB) decided to keep interest rates on hold last week, and South Africans should expect cuts from next year. <\/p>\n\n\n\n
Prior to the SARB’s decision, annual headline consumer inflation rose from 5.4% in September to 5.9% in October, claiming for the third month in a row. <\/p>\n\n\n\n
The main reason for the increase was higher food (8.7%), fuel inflation (11.2%) and housing utilities (5.4%).<\/p>\n\n\n\n
Consumer prices rose by 0.9% in October after the cost of the milk and eggs category (2.5%) grew due to the bird flu outbreak. <\/p>\n\n\n\n
Despite the higher inflation reading, the SARB’s Monetary Policy Committee (MPC) kept the repo rate steady at 8.25%. <\/p>\n\n\n\n
“Importantly, the decision to pause was unanimous, unlike at the previous two meetings (when votes were split between a pause and a 25 bps increase),” the Bureau for Economic Research (BER) said. <\/p>\n\n\n\n
“Underpinning the decision was SARB\u2019s expectation that consumer inflation is set to moderate (despite the recent deceleration) and the MPC\u2019s view that the policy rate is currently already restrictive.”<\/p>\n\n\n\n
“The MPC, however, emphasised that risks to inflation remain tilted to the upside.” <\/p>\n\n\n\n
Where next <\/strong><\/p>\n\n\n\n The Nedbank Group Economic Unit said that the unanimous decision to keep interest rates unchanged while maintaining a hawkish tone was unsurprising, with central banks across the globe doing similar. <\/p>\n\n\n\n It added that the SARB has finished its hiking cycle as the October inflation number is unlikely to kickstart an upward trend in inflation. <\/p>\n\n\n\n The pressure on food inflation should decline as the poultry sector situation starts to improve, whilst the domestic fuel price starts to improve amidst a firmed rand and lower global oil prices.<\/p>\n\n\n\n