By Lehlohonolo Lehana.
The South African Reserve Bank (SARB) governor, Lesetja Kganyago, announced that the interest rate in the country will remain unchanged.
This comes after the SARB’s monetary policy committee (MPC) met this week to decide on the country’s repurchase rate (repo rate), with the outcome, remaining at the 14-year high of 8.25%.
This means that the prime lending rate in South Africa would also remain at 11.75% per annum.
The benchmark repo rate has been at 8.25% for the last year, with inflation still at the upper end of the bank’s inflation target, albeit cooling from the spiralling levels of 2022 and 2023.
For April, inflation slowed to 5.2%.
Kganyago said inflation outcomes were worse than expected early in the year, leading to a repricing of rate expectations, adding that there’s still considerable uncertainty about the longer-run inflation outlook globally.
He said inflation outcomes in the United States have been more benign recently with markets still seeing room for adjustments by the US Federal Reserve this year.
“We may also see easing by other major central banks,” Kganyago said.
The Sarb still expects SA GDP growth to come in at 1.2% for this year, with the governor welcoming the reduced load shedding during the past few months.
“Turning to the growth outlook, economic activity indicators for the first quarter have been coming in worse than expected, despite reduced electricity load shedding. However, these higher-frequency data can be volatile. We expect slightly weaker first-quarter growth, but this will be offset by better second-quarter growth,” said Kganyago.
“We assess the risks to the growth outlook as balanced. The recent improvement in the power supply, with no load shedding since 26 March, is a welcome development.
“We have revised our load shedding assumption down, but additional revisions may be required if this performance is sustained,” he added.
“Overall, our forecasts show a modest acceleration in growth, over the next few years, alongside a gradual stabilisation of inflation at our target. However, uncertainty is unusually elevated at the moment, “he said.