SARB keeps repo rate unchanged at 8.25%

This means the prime lending rate will remain at  11.75%.

Governor Lesetja Kganyago made the announcement on Thursday afternoon. 

This is the first time the central bank has opted to keep the repo rate unchanged after it was hiked by 475 basis points over the past 18 months in its attempt to keep inflation in check.

Kganyago said three members of the committee preferred to keep the rates on hold, while two preferred an increase of 25 basis points.

The rate announcement comes a day after Statistics South Africa data showed annual headline inflation slowed to a 20 months low to 5.4% in June from 6.3% the previous month.

But Kganyago warned that at the current repurchase rate level, the policy remains restrictive and consistent with elevated inflation expectations.

"Guiding inflation back towards the mid-point of the target band reduces the economic costs of high inflation and will achieve lower interest rates in the future," he said. 

"Since early 2020, the committee has recommended additional and indirect means of lowering inflation that are within the reach of the public sector, including achieving a prudent public debt level, increasing the supply of energy, moderating administered price inflation and keeping wage growth in line with productivity gains. 

"Such steps would strengthen monetary policy effectiveness and its transmission to the broader economy," added Kganyago. 

Kganyago said the longer-term economic outlook remains clouded by risks to the inflation trajectory, ongoing geopolitical tensions and the effects of climate change.

"While goods price inflation has eased in much of the world, core inflation remains elevated, keeping consumer price inflation from falling more sharply. 

"Globally, monetary policy is likely to remain focused on ensuring inflation continues to retreat, implying policy rates will stay higher. We expect markets in major financial centres to remain volatile."

Kganyago said energy and logistical constraints remain a drag on South Africa's growth outlook, limiting economic activity and increasing costs.

"In the absence of sustained and consistent increases in energy supply, electricity prices continue to present clear inflation risks.

"Load shedding and logistics constraints may also have broader effects on the cost of doing business and the cost of living. 

"Given uncertain fuel and food price inflation, the considerable risk still attaches to the forecast for average salaries.

"Sticky inflation in major economies suggests that average interest rates in these economies will remain high.

"As a result, tighter global financial conditions are likely to persist, raising the risk profile of economies needing foreign capital," said Kganyago.

ALSO READ