South Africa\u2019s central bank cautioned that borrowing costs around the world are likely to remain higher for longer as it grows doubtful about the inflation outlook amid US President Donald Trump\u2019s aggressive trade tariffs.<\/p>\n\n\n\n
\u201cConfidence around the medium-term outlook has reduced significantly due to heightened global trade tensions and elevated domestic uncertainties,\u201d the central bank said in its semi-annual Monetary Policy Review published Tuesday in Johannesburg. <\/p>\n\n\n\n
\u201cAlthough policy rates are expected to decline further in major economies, the new risks that have emerged suggest they will remain higher for longer.\u201d<\/p>\n\n\n\n
Since Trump\u2019s return to the White House in January, he has forged ahead with an aggressive tariff regime. On April 2 he announced reciprocal tariffs on US trading partners before postponing them for 90 days on most nations while keeping a 10% levy.<\/p>\n\n\n\n
\u201cThe confidence regarding global economic developments we projected in October, has largely evaporated,\u201d Reserve Bank Governor Lesetja Kganyago said.<\/p>\n\n\n\n
He added that waning confidence has been largely replaced by \u201chigh economic uncertainty here at home”.<\/p>\n\n\n\n
\u201cThe inflation and inflation expectation is better today; we lowered borrowing costs and this will support economic activity. However, risks to domestic inflation and growth have risen markedly since the start of the year,\u201d Kganyago said.<\/p>\n\n\n\n
The South African Reserve Bank kept the key interest rate unchanged at 7.5% last month after three successive 25 basis point cuts because of the extreme levels of uncertainty as trade tensions escalate.<\/p>\n\n\n\n
\u201cWith the recent softening in inflation, the SARB has cut interest rates by a cumulative 75 basis points since September 2024, reducing the degree of policy restrictiveness,\u201d the central bank said in a statement on X. <\/p>\n\n\n\n
\u201cGiven the upside risks over the medium-term horizon, the current monetary policy stance is deemed appropriate.\u201d<\/p>\n\n\n\n
Officials noted that for the first time in several years, the risk that disinflation at a global level will stall, if not reverse, has increased sharply, causing market views of short-term rate expectations to shift higher.<\/p>\n\n\n\n
While inflation in South Africa remains largely contained and is expected to stay in line with the 4.5% midpoint of the central bank\u2019s target range, uncertainty around this outlook has risen since the beginning of the year.<\/p>\n\n\n\n
The central bank said this is due to heightened geopolitical and trade tensions, as well as domestic political strain within the country\u2019s governing coalition over plans to raise value-added taxes.<\/p>\n\n\n\n
The central bank estimates that a proposed 0.5 percentage point VAT increase on May 1, to be followed by another 0.5 percentage point increase next year, may add 0.2 percentage points to headline inflation annually.<\/p>\n","protected":false},"excerpt":{"rendered":"
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