Reserve Bank keeps repo rate unchanged at 8.25%

The prime lending rate for commercial banks  also remains at 11.75%.

The decision was announced by Reserve Bank Governor Lesetja Kganyago on Wednesday.

Kganyago says the decision was unanimous among members of the MPC.

The announcement comes just days after Statistics South Africa announced the latest headline consumer inflation which increased for a second consecutive month to 5,6% in February from 5,3% in January.

The 5.6% increase is closer to the upper limit of the South African Reserve Bank’s inflation target range.

Kganyago says in making the decision, the MPC considered a range of risks.

"Inflation expectations have moderated in the latest survey. 

This is welcome, but two year ahead expectations are still in the top half of our target range.

 Expectations are projected to ease towards our 4.5% objective as inflation slows, but we have little margin to absorb shocks so long as expectations are high.

Regarding food prices, we are at a difficult juncture. 

Last year, food inflation hit its highest levels since 2008. Food inflation has now slowed. 

But this is a critical time in the growing season, and it has been unusually hot and dry, which may cause food inflation to pick up again," says Kganyago.

He says the performance of the rand was also considered. 

"Considering the exchange rate, the rand has been trading somewhat weaker than we expected at our last MPC meeting.

 This is partly due to interest rates in the major advanced economies staying high for longer.

 The currency is also under pressure from weakening terms of trade. Furthermore, investors see significant near-term domestic uncertainty.

 We view the exchange rate as undervalued.

On balance, the various risks to the inflation forecast are skewed to the upside," adds Kganyago.

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