Repo rate stays at 8.25%

Repo rate stays at 8.25%

The Reserve Bank’s Monetary Policy Committee (MPC) has kept the repo rate unchanged at 8.25%.

Briefing the media following a meeting of the MPC, Reserve Bank governor, Lesetja Kganyago said the decision was unanimous.

In its statement on Thursday, the MPC said inflation outcomes were worse than expected early in the year, leading to a repricing of rate expectations.

“There is still considerable uncertainty about the longer-run inflation outlook, globally. That said, inflation outcomes in the United States have been more benign recently, and markets still see some room for adjustments by the US Federal Reserve this year. We may also see easing by other major central banks.”

The country’s current inflation rate stands at 5.2%.

The MPC further said the exchange rate of the rand has been particularly volatile since the previous MPC meeting in March.

“Turning to the outlook, we now see inflation stabilising at our 4.5% objective in the second quarter of next year. This is an improvement on our March forecast, which only reached this milestone at the end of 2025. The changes to the outlook, however, are not large when compared to our March forecast. Average inflation for 2025 is only a tenth of a percentage point lower. The task of achieving our inflation objective is not yet done.”

The bank has revised down its 2024 food and core forecasts marginally due to better than expected CPI releases in March and April.

Fuel price inflation is now expected to be higher, in the near-term, but it improves for 2025.

“Nonetheless, the Committee remains concerned that inflation expectations are elevated. After three years of inflation being above 4.5%, few survey respondents, especially from businesses and trade unions, now believe that inflation will be at 4.5% in two years’ time.

Although the MPC assesses the inflation forecast risks to be broadly balanced at present, high inflation expectations require that we deliver on our target sooner rather than later, to re-anchor expectations.”

The MPC welcomed the recent improvement in the supply of power, with no loadshedding since 26 March.

“We have revised our load shedding assumption down, but additional revisions may be required if this performance is sustained. Overall, our forecasts show a modest acceleration in growth, over the next few years, alongside a gradual stabilisation of inflation at our target. However, uncertainty is unusually elevated at the moment.

“Considering this outlook, the MPC decided to keep the repo rate unchanged at 8.25%,” said Kganyago.

The next meeting of the MPC will be in July. –