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Relief for consumers as SA Reserve Bank keeps interest rates unchanged

South African Reserve Bank governor Lesetja Kganyago. File photo: African News Agency (ANA)

South African Reserve Bank governor Lesetja Kganyago. File photo: African News Agency (ANA)

Published Jul 20, 2023


The South African Reserve Bank (SARB) governor, Lesetja Kganyago, today announced that the repurchase rate (repo rate) in the country will remain the same.

This means that the repo rate will remain at 8.25% and the prime lending rate at 11.75% in the country.

This comes after the SARB’s Monetary Policy Committee’s (MPC) meeting, which hiked the rate for 10 consecutive meetings since the start of 2022, with South Africans seeing the repo rate rise from 3.75% at the start of January 2022.

Kganyago said during his briefing, “While South Africa’s economic conditions appear to have improved, the longer-term outlook mirrors the uncertainty of the global environment. Prices for commodity exports continue to weaken. While households and firms exhibit resilience, economic growth has been volatile for some time and highly sensitive to new shocks.”

On GDP, the governor said that growth is slightly higher than it was in May.

“For 2023, the Bank’s forecast for South Africa’s GDP growth is slightly higher than in May, at 0.4% (from 0.3%). Our GDP growth forecast for 2024 and 2025 is unchanged from the previous meeting, at 1.0% and 1.1%, respectively,” he said.


“Our food price inflation forecast for 2023 remains high but is revised lower in this meeting to 10.3% (from 10.8%), and up slightly to 5.2% in 2024 (from 5.0%),” Kganyago announced.

He further said, “Risks to the inflation outlook are assessed to the upside. Headline inflation at a global level continues to moderate, but food price inflation remains high and oil markets remain tight.”

“Better monthly outcomes have led to a downward revision in our forecast for core inflation to 5.2% in 2023 (previously 5.3%), 4.9% (from 5.0%) and 4.5% (from 4.6%) in 2024 and 2025, respectively,” the governor said.

On Wednesday, Statistics SA announced that consumer prices in South Africa dramatically retreated to their lowest in 20 months in June, dragged lower by fuel and food prices during the month.

Annual headline inflation cooled to 5.4% in June from 6.3% year-on-year in May, sinking below the upper limit of the SARB’s monetary policy target range.

The rate in June is the lowest reading since October 2021, when the rate was 5.0%, and the last time inflation was below 6% was in April 2022.

On a monthly basis, however, inflation increased by 0.2% in June.

Watch the governor make his announcement below:

FNB CEO Jacques Celliers said, "Given similar actions taken by other central banks in certain global markets, maintaining the status quo was a probable option for the SARB. However, a bias towards higher rates remains in many developed markets as central banks are wary of a rebound in inflation during the second half of the year. The Reserve Bank is aware that imported inflation and administered prices rather than consumer spending have been driving inflation and is acting with the greatest caution in its monetary policy mandate to maintain price stability.

Locally, the better-than-expected grid performance in the winter months has provided some relief to households and businesses, but energy constraints remain a medium-to long-term risk. While consumer confidence is a volatile metric, we’ve also noted a significant decline in confidence, largely attributed to factors beyond the SARB’s control. As inflationary pressures ease, we can expect a rebound in consumer and business activity. The activation of deferred purchases and investments could boost the economy," Celliers further added.

FNB Chief Economist Mamello Matikinca-Ngwenya says, "Having raised interest rates at every meeting since November 2021 and defying calls for shallower rate hikes, or a pause, in the past few meetings, the end of the hiking cycle has been difficult to predict. Nevertheless, we believe this pause is consistent with the MPC taking stock of local inflation that has fallen within the target band in June, US inflation that has fallen closer to target, as well as an improvement in the risk associated with SA assets and the implied starting point for the rand since the previous MPC meeting.

"In addition, signs of the transmission of monetary policy are starting to trickle in. The 2Q23 FNB/BER Consumer Confidence Index showed that households consider the current period to be inappropriate for the purchase of durable goods. In line with this, new passenger car sales have slowed considerably, and demand for mortgages is falling. Furthermore, affordability constraints amid compressed disposable income and tighter lending standards should constrain spending growth and reinforce slower inflation. Overall, prevailing upside inflation and funding risks should keep the MPC cautious. To insulate their ability to reach the 4.5% inflation target in the medium term, the hiking cycle may be resumed, and most likely, interest rates will remain higher for longer," Matikinca-Ngwenya went on to say.