The South African Reserve Bank (SARB) announced its decision to keep the repo rate unchanged at 8.25% on Thursday, September 21, 2023. This move also leaves the prime lending rate, the rate at which commercial banks lend money, steady at 11.75%. The announcement was made by Reserve Bank Governor Lesetja Kganyago, marking a second consecutive time of unchanged borrowing costs.
The decision by the SARB's Monetary Policy Committee (MPC) was a close one, with three out of five members voting to maintain the current repo rate. However, two members of the committee favored an increase of 25 basis points.
This decision follows the US Federal Bank's choice to also keep their repo rate unchanged on Wednesday. The maintenance of the repo rate comes as a relief to consumers burdened with debt.
Despite this reprieve for indebted consumers, the central bank's tone remains hawkish. The SARB noted that growth forecasts are still muted, with estimates for GDP growth remaining unchanged at 1% for 2024 and 1.1% for 2025.
Governor Kganyago stated that in the coming months, they expect headline inflation to rise somewhat before reverting to the mid-point of the target range in 2025. He emphasized that serious upside risks to the inflation outlook persist. Factors such as high food price inflation significantly tightened oil markets, and sticky core inflation contributed to these risks.
Kganyago also highlighted persistent risks clouding the longer-term economic outlook, including the potential negative effects of climate change and ongoing geopolitical tensions. He said that global monetary policy is likely to remain focused on ensuring inflation continues to moderate.
In light of these risks, Kganyago confirmed that the MPC will remain vigilant and stand ready to act should these risks begin to materialize. He stressed that decisions will continue to be data-dependent and sensitive to the balance of risks to the outlook. The inflation and repo rate projections from the updated Quarterly Projection Model (QPM) will serve as a broad policy guide, subject to changes in response to new data and risks.
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