The South African Reserve Bank (SARB) kept its benchmark repo interest rate at 8.25% at its January 25th, 2024, meting as widely anticipated. Rates remain at their highest since 2009. The bank highlighted the persistence of inflation risks while emphasizing a balanced evaluation of risks to medium-term growth. The SARB noted that the return of inflation to the target has been slow, despite the expected gradual moderation. Headline inflation fell for a second month to 5.1% in December from 5.5% in November, but still above the preferred 4.5% midpoint of the central bank’s target of 3-6%.
The move saw the South African rand trade around 18.8 per USD, its highest in over a week supported by the expectations of delayed rate cuts.
South Africa Inflation
- Headline inflation fell for a second month to 5.1% in December from 5.5% in November, but still above the preferred 4.5% midpoint of the central bank’s target of 3-6%.
- The inflation forecast was kept at 5% for 2024 and was slightly revised upward to 4.6% for 2025, compared to the previous estimate of 4.5% in November.
South Africa Growth
SARB also revised its growth forecasts higher
- The SARB maintained its growth projections at 1.2% for 2024 and 1.3% for 2025.
Looking ahead, Governor Lesetja Kganyago said future interest rate decisions will depend on the data available during the MPC meetings.
The high rates further weigh on household consumption spending those accounts for about two-thirds of South African GDP. Higher interest rates make it more expensive for consumers to borrow as they confront a cost-of-living crisis stoked by high food prices.
Source SARB
From The Traders Community Research Desk