Sarb holds rates again but points to easing inflation on the horizon

South African Reserve Bank governor Lesetja Kganyago announced that the central bank’s monetary policy committee (MPC) would keep the repo rate on hold at 8.25%, noting that inflation was showing signs of gradual retreat.

“We anticipate further progress as inflation slows, helping to re-anchor expectations firmly at 4.5%. While the forecast has improved, the balance of risks is assessed to the upside. Against this backdrop, the MPC decided to keep the repo rate unchanged at 8.25%,” he said.

Briefing journalists in Pretoria on Thursday afternoon, Kganyago said four members of the MPC preferred an unchanged stance, and two members of the committee preferred a reduction of 25 basis points.

It is the first MPC repo rate decision of the year not to be unanimous.

“In discussing the stance, MPC members agreed that restrictive policy remains appropriate to stabilise inflation at 4.5%. The committee assessed that an unchanged stance remained appropriate given the inflation risks.

“Some members, however, were of the view that the inflation outlook had improved enough to reduce the degree of restrictiveness.”

Kganyago said global price increases were easing, but inflation levels in various countries were not yet easing within those economies’ target ranges.

“Clearly the battle against inflation is not yet won and for this reason global interest rates remain elevated. At the same time, there has been some policy divergence which reflects different countries’ circumstances.”

He said while rates were lowered in countries such as Canada and Switzerland, rates were kept the same in US, the UK and Japan.

Latin American economies have been able to cut rates after lowering inflation, he said.

“A concern for central banks, however, is that lower inflation outcomes have not always been sustained.”

He added that while the mining and manufacturing outlook were trimmed, the outlook saw somewhat faster growth due to improvement in power supply and logistics.

The next MPC meeting is scheduled for September.

TimesLIVE