SARB leaves rates on ice

THE South African Reserve Bank (SARB) has effectively closed the door to cutting interest rates any time soon until the consumer headline inflation dips to the midpoint of the target range.

The SARB’s Monetary Policy Committee (MPC), at its first meeting of 2024 on Wednesday, left interest rates unchanged leaving the repurchase rate (repo rate) and prime lending rates at 8,25 percent and 11,75 percent, respectively.

The decision was unanimous for a second meeting in a row, suggesting that all members were confident that interest rates were restrictive enough.

The cost of borrowing in South Africa has been kept at elevated levels since the last interest rates cut in May 2023 as inflation remained stubbornly high for the remainder of last year. Annual consumer price inflation pulled back in December, easing to 5,1 percent from 5,5 percent in November and 5,9 percent in October, while the average inflation rate for the year was 6,0 percent, lower than 6,9 percent recorded in 2022.

However, the MPC still assessed the risks to the inflation outlook as tilted to the upside due several domestic and global risks, but the risks to the medium-term growth outlook were assessed to be balanced.

The MPC adjusts interest rates accordingly as it wants inflation to be anchored to the 4,5 percent midpoint rather than the upper limit of its 3–6 percent target range.

SARB Governor Lesetja Kganyago yesterday said headline inflation for 2024 was expected to ease to 5,0 percent, with few significant changes to the forecasts for underlying components.

Kganyago, however, reiterated that permanently lower inflation and interest rates required inflation expectations to be closely anchored to the midpoint of the target band. — IOL.