Lesetja Kganyago.
Image: Simphiwe Mbokazi / Independent Newspapers.
South African Reserve Bank (Sarb) governor, Lesetja Kganyago, on Thursday announced the central bank's Monetary Policy Committee's (MPC) decision on the repurchase rate (repo rate) in the country.
Kganyago said that interest rates in South Africa will remain unchanged.
This means the repo rate will remain at 7.5% while the prime lending rate in the country will remain at 11%.
Kganyago said that four members preferred this action, while two favoured a cut of 25 basis points.
Ahead of the governor's announcement it was widely predicted by economists and analysts that the Sarb would be keeping the rate unchanged.
The governor said that inflation risks exist around the globe.
"Inflation in advanced economies remains elevated, with both headline and core above 2% in the United States, Euro area, United Kingdom and even Japan. Some policy adjustments by major central banks are still expected this year, but rates are likely to remain high for longer, given new inflation risks," he said.
Speaking about the country's economy, he said, "Growth picked up in the fourth quarter of last year. The uptick was led by the household sector, as expected, boosted by lower inflation and withdrawals from the Two-Pot pension system. That said, the overall growth picture was disappointing, with other sectors showing weakness. Growth for the full year 2024 was 0.6%, marginally below our expectations, and slightly worse than in 2023. We have now revised down our 2025 growth forecast slightly, to 1.7%, while leaving the outer years unchanged. We attribute lower growth partly to subdued demand, and partly to supply, given lingering supply-side fragilities. We assess that the risks to growth are to the downside."
"For now, inflation appears contained. In terms of the outlook, the current forecast had more moving parts than usual, including a reweighting of the Consumer Price Index by Statistics South Africa, and the proposed Value Added Tax increases announced in the Budget. We also adjusted assumptions such as the oil price, to reflect shifts in global markets. The overall result of these changes is a marginally lower inflation outlook, with headline now projected at 3.6% this year and 4.5% next year. This is mainly due to the better fuel-price projections. It also reflects a more benign path for administered prices, given the lower electricity tariffs announced by NERSA in February. These factors offset pressure on food and core inflation from the proposed VAT increase, which we think will add about 0.2 percentage points to headline inflation. We see risks to this forecast on both the upside and the downside, with the medium-term balance of risks skewed to the upside," Kganyago said during his announcement.
In the US, the Federal Open Market Committee (FOMC) decided to keep the federal funds target range unchanged at 4.25% - 4.50%, in a move that analysts had largely anticipated.
This decision comes after a strong overall performance from the US economy, which the FOMC acknowledged has made significant strides toward its goals over the past two years.
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