South Africans breathed a sigh of relief on Thursday as the SA Reserve Bank (Sarb) decided to leave its key repo rate unchanged at 8.25%.
The move comes as consumer inflation hit a 20-month low for June, and means that the prime lending rate of commercial banks remains at 11.75%.
Sarb Governor Lesetja Kganyago announced the decision following the conclusion of the bank’s July Monetary Policy Committee (MPC) meeting this week.
After rapidly raising rates at the previous 10 policy meetings, the MPC’s latest move to hold rates steady effectively ends its current hiking cycle, which has seen 475 basis points (bps) in repo rate increases since late 2021. This has taken interest rates to a 14-year high, as the Sarb moved to fight spiralling inflation.
Listen/Read: SA’s 5.4% June CPI worth a cheer
The decision to pause its rate hiking cycle comes a day after official data from Stats SA showed a considerable easing in inflation, which has slowed for the third consecutive month.
June’s inflation print of 5.4% falls within Sarb’s inflation target band, signalling that the effects of the central bank’s hiking cycle is filtering through.
Most economists and market watchers expected one last 25bp increase ahead of the July MPC meeting.
Kganyago said the Sarb’s GDP growth forecast is slightly revised upwards to 0.4%, up from its May estimate of 0.3%.
