The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has elected to hold interest rates.<\/p>\n\n\n\n
This keeps the repo rate at 7.00% and the prime lending rate at 10.50%. Four members of the committee voted to hold, while two members preferred a 25 basis point cut.<\/p>\n\n\n\n
The move is in line with what economists and analysts predicted ahead of the announcement, where more economists pencilled in a hold on rates than those who predicted a cut.<\/p>\n\n\n\n
However, the split in the votes shows that it was a close call as many had expected, with either outcome never truly out of the question for either grouping.<\/p>\n\n\n\n
Reserve Bank governor Lesetja Kganyago said that global markets appear to be resilient in the face of market turmoil and uncertainty.<\/p>\n\n\n\n
However, while global conditions are currently favourable for emerging markets like South Africa, the long-term outlook is still highly risky.<\/p>\n\n\n\n
Nevertheless, local indicators are showing promise, with the governor pointing to the second quarter growth surprising on the upside at 0.8%.<\/p>\n\n\n\n
This resulted in the SARB increasing its GDP outlook for 2025 to 1.2%, from 0.9% at its previous meeting.<\/p>\n\n\n\n
On the inflation front, despite the surprising cooling of inflation in August at 3.3%, inflation is still trending upward, as was expected.<\/p>\n\n\n\n
The central bank expects headline inflation to continue to creep up, hitting an average of 4%. Importantly, South Africa now has to factor in much higher electricity prices, thanks to energy regulator Nersa’s errors.<\/p>\n\n\n\n
Kganyago said this reflects the continued dysfunction in administered prices.<\/p>\n\n\n\n
“This is a reminder of the serious dysfunction in administered prices, which undermines purchasing power and weakens growth,” he said.<\/p>\n\n\n\n
“The solution to this crisis is not a higher level of inflation, but rather sector-specific reforms to improve efficiency.”<\/p>\n\n\n\n
Because of the uncertain outlook and in line with the central bank’s move to stabilise inflation at 3%, the committee opted to keep rates unchanged.<\/p>\n\n\n\n Since September last year, the SARB has reduced rates by 125 basis points, and it now wants to see how this is affecting the economy, how expectations evolve, and how inflation risks are resolved.<\/p>\n\n\n\n “The forecast has rates easing gradually as inflation returns to the bottom end of the 3-6% target range,” Kganyago said.<\/p>\n\n\n\n “The MPC emphasises that stabilising inflation at 3%, rather than 4.5%, implies a lower longer-term level for the policy rate.”<\/p>\n\n\n\n The governor said that the SARB’s economic modeling takes inflation expectations as an important role in shaping the transition to its 3% preference. <\/p>\n\n\n\n “Given uncertainty about the behaviour of expectations, for this meeting we considered scenarios where expectations adjust more slowly than they do in our baseline,” he said.<\/p>\n\n\n\n “The scenarios show a slower convergence to 3% inflation. The policy stance is somewhat tighter over the forecast period, with roughly one less cut, and moderately lower growth.”<\/p>\n\n\n\n Kganyago said that is the bank’s desire to finalise inflation target reform, and it is continuing to engage with the National Treasury to agree on a new target as soon as is practical.<\/p>\n\n\n\n Ahead of the announcement, economists pointed to the bank’s “preference” for a 3% target as the biggest impediment to a rate cut.<\/p>\n","protected":false},"excerpt":{"rendered":" The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has elected to hold interest rates.<\/p>\n","protected":false},"author":10,"featured_media":828563,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[2922,3619],"class_list":["post-837891","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-interest-rates","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837891","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=837891"}],"version-history":[{"count":8,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837891\/revisions"}],"predecessor-version":[{"id":837904,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/837891\/revisions\/837904"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/828563"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=837891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=837891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=837891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Meeting<\/th> Repo Rate<\/th> Prime<\/th> Change<\/th><\/tr><\/thead> September 2024<\/td> 8.00%<\/td> 11.50%<\/td> -25bp<\/td><\/tr> November 2024<\/td> 7.75%<\/td> 11.25%<\/td> -25bp<\/td><\/tr> January 2025<\/td> 7.50%<\/td> 11.00%<\/td> -25bp<\/td><\/tr> March 2025<\/td> 7.50%<\/td> 11.00%<\/td> Hold<\/td><\/tr> May 2025<\/td> 7.25%<\/td> 10.75%<\/td> -25bp<\/td><\/tr> July 2025<\/td> 7.00%<\/td> 10.50%<\/td> -25bp<\/td><\/tr> September 2025 <\/strong><\/td> 7.00%<\/mark><\/strong><\/td> 10.50%<\/mark><\/strong><\/td> Hold<\/mark><\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n Chasing the target<\/h2>\n\n\n\n