THE SA Reserve Bank’s monetary policy committee left interest rates unchanged on Thursday – after 10 hikes in 21 months aimed at cooling inflation.
Three members voted to keep the repo rate unchanged at 8.2%, while two wanted an increase of 25 basis points. This leaves the prime rate at 11.75%.
Since November 2021, monthly payments on a R2 million home loan are now almost R6 200 more expensive due to these aggressive hikes.
On Tuesday, Statistics SA reported that consumer price inflation had slowed dramatically to 5.4% in June from 6.3% in May. The last time consumer inflation was below the Reserve Bank’s maximum target of 6% was more than a year ago, in April 2022.
The Reserve Bank has now revised its headline inflation rate down from 6.2% to 6.0% for 2023. It also lowered it to 5.0% in 2024, before stabilising at 4.5% in 2025.
It also lowered its food price inflation forecast for 2023 from 10.8% to 10.3% – but SARB governor Lesetja Kganyago warned that food prices remain high and the risk of drier weather conditions in the coming months has increased.
“In the absence of sustained and consistent increases in energy supply, electricity prices continue to present clear inflation risks. Load shedding and logistics constraints may also have broader effects on the cost of doing business and the cost of living,” Kganyago added.
Still, the Reserve Bank bumped its forecast for South Africa’s GDP growth from 0.3% to 0.5%. GDP growth forecasts for 2024 (1.0%) and 2025 (1.1%) remain unchanged.
Kganyago noted that households and firms look resilient, with spending still growing in real terms. Although credit growth to households and corporates has slowed in recent months, it has increased in real terms compared to last year, Kganyago noted.
“Investment by the private and public sectors is revised up and the terms of trade have remained more beneficial than previously forecast.”
Asked whether this was the definitive end of the rate hiking cycle, Kganyago said “no”. Future rate decisions will be guided by new data, he added.
Image (Governor Lesetja Kganyago says future rate decisions will be guided by new data following the unchanged rates on interest).
