SA Reserve Bank keeps interest rates unchanged once again

SA Reserve Bank Governor Lesetja Kganyago. FILE PHOTO.

SA Reserve Bank Governor Lesetja Kganyago. FILE PHOTO.

Published Mar 27, 2024

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The South African Reserve Bank Governor, Lesetja Kganyago, today announced that the Monetary Policy Committee (MPC) decided to keep the repurchase rate (repo rate) for the country unchanged.

This means that the repo rate will remain at 8.25%, while the prime lending rate also stays at 11.75%.

In a unanimous decision by the MPC, the governor referenced global unemployment rates, the poor performance of the country’s economy in the final quarter of 2023 and load shedding which formed a basis on the decision to keep interest rates unchanged.

Kganyago said, “Since the start of the year, we have seen persistent global inflation pressures. Headline inflation rates are generally lower than they were a year ago, but underlying inflation is still elevated. Goods inflation has declined significantly, as supply shocks wear off, but there is evidence of stronger inflation in services, across a range of economies. Meanwhile, unemployment rates remain low – especially in the United States.

In these circumstances, major global central banks are expected to cut rates at a slower pace, and to start cutting at a later stage. A few emerging market central banks have been reducing rates already, but these economies had the largest hikes previously, and their interest rates are now well above inflation.“

He further added, “Turning to South Africa, the economy performed worse than expected in the fourth quarter of last year, expanding just 0.1%. Growth for 2023 as a whole was 0.6%. The main reason for this bad performance was supply-side problems. Electricity load shedding was worse than in previous years. Port and rail problems also emerged as binding constraints on output.”

It was widely expected that the rate would be kept unchanged ahead of the governor’s announcement.

“We expect the MPC to leave interest rates unchanged … as inflation’s descent towards the 4.5% target stalled over the past two months,” the Nedbank Group’s Economic Unit said in a note on Friday.

FNB’s economists concurred: “While we expect interest rates to remain unchanged, the messaging at that meeting remains key as many spectators of monetary policy around the globe seek indications of when interest rate cuts may be implemented.

“The middle of the year appears to be the expected turning point … However, with inflation still above target in much of the globe and trade fragmentation still the order of the day … risks remain tilted upwards.“

SARB governor Lesetja Kganyago has repeatedly said that the MPC wishes to see headline earnings inflation trend towards the 4.5% midpoint of the SARB’s 3% to 6% target range, in a consistent manner, before considering interest rate cuts.

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