The South African Reserve Bank Governor, Lesetja Kganyago today announced that the repurchase rate (repo rate) will remain the same.
This comes after the bank’s monetary policy committee (MPC) met this week to decide on the repo rate, with the outcome, remaining at the 14-year high of 8.25%.
This means that the prime lending rate in the country will remain at 11.75%.
The MPC decision was in line with several economists' expectations.
“As we move into the second half of the year, global inflation continues to ease. The very rapid price increases of 2022 and 2023 have receded. However, inflation in most economies has yet to stabilise in line with targets,” the governor said.
He also said that the battle against inflation is not yet won, and for this reason, global interest rates remain elevated.
Two members of the MPC wanted a decrease of 25 basis points to the repo rate, while four voted to keep it unchange.
“Over the medium term, we continue to see inflation stabilising at 4.5%, with core inflation remaining close to this midpoint objective throughout. The risks to the growth forecast are assessed as broadly balanced, with ample scope for structural reforms to lift growth further over the medium term,” Kganyago said.
“Since our last meeting, policy rates were lowered in Canada, Switzerland and the euro area, but kept unchanged in the United States, the United Kingdom, and Japan. Among emerging markets, countries that have lowered inflation more, especially in Latin America, have been able to cut more. This policy divergence reflects different country circumstances,” he said.
On South Africa’s economic performance, the governor said that in the first half of the year, it was disappointing.
“Over the medium term, we expect somewhat faster growth, supported by a more reliable electricity supply and improving logistics, among other factors,” he said.
Mfundo Nkuhlu, the chief operating officer of Nedbank, said yesterday that the South African economy is not out of the woods yet despite the forming of a Government of Naitonal Unity.
While speaking at the Nedbank Top Empowerment Conference, Nkhhuhlu said, “The economy has battled to grow above 2%. In some quarters, South Africa is referred to as a 1% economy.”
This insight came a day after the the International Monetary Fund predicted South Africa’s gross domestic product would grow by 0.9% this year in spite of the improvement in the logistics sector, supply of electricity, and the suspension of load shedding.
Despite the changed political environment with GNU, “South Africa is not out of the woods”.
He said South Africa continued to experience a sluggish economy characterised by sticky levels of inflation, with inflation sitting at above 5% and outside the Sarb’s inflation target it sought to achieve.
“This means interest rates are likely to be higher for longer, which is a tough message to households struggling to make ends meet,” Nkuhlu said.
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