SA Reserve Bank maintains repo rate at 15-year high, Economists weigh in

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In its July meeting, the South African Reserve Bank (SARB) decided to keep the repo rate at 8.25%, maintaining a 15-year high. This marks the seventh consecutive meeting with no change in the rate, in line with market expectations. However, two of the five members of the Monetary Policy Committee (MPC) voted for a 25 basis point cut.

The SARB emphasized that maintaining a restrictive policy stance is essential to stabilize inflation at the target rate of 4.50%. Given the current inflation risks, the bank deemed it appropriate to keep the rate unchanged.

Read: SA Reserve Bank holds repo rate steady: no drop in interest rates just yet

Economist Reactions

Adriaan Pask, Chief Investment Officer at PSG Wealth, noted that while the decision was consistent with expectations, concerns about inflation persist. “We remain of the opinion that markets will continue to be sensitive to any developments related to interest rates, inflation, unemployment, and wages. Therefore, investors should expect heightened volatility over the next few months,” Pask commented.

Siphelele Sokhela, Brand Manager at 1Life Insurance, provided a more optimistic perspective. “South Africans can breathe a sigh of relief as rates remain unchanged at 8.25%. This decision provides a reprieve for those struggling financially, offering them the chance to adjust their financial plans for the second half of 2024 without the immediate worry of rising debt. Despite this, inflation remains high, and economists predict it may stay elevated longer. This ongoing economic pressure impacts about 57% of South Africans, who are already experiencing significant financial strain according to 1Life’s Third Annual Generational Wealth Survey.”

Cut down on unnecessary spending

Sokhela advised consumers to avoid lapsing on their financial commitments and to cut down on unnecessary spending. “Now is the time to investigate the best ways to secure your family’s financial future. Seek financial education and partner with experts to manage your money wisely, as decisions made now will affect your long-term financial stability.”

Frank Blackmore, Lead Economist at KPMG South Africa, provided insight into the MPC’s decision. “The decision to keep rates unchanged at 8.25% reflects the fact that inflation has not yet reached the target of 4.5%, with the most recent rate in May remaining at 5.2%. Despite the lack of a rate change, the meeting had a positive note: the Governor indicated an improved outlook for inflation in the latter part of the year. While there may be further shocks keeping inflation high temporarily, headline inflation is expected to dip below 5% soon, with core inflation remaining close to 4.5%. This could potentially allow the SARB to reduce interest rates towards the end of the year.”

The SARB’s decision reflects a cautious approach to managing inflation while providing some stability in a challenging economic environment.

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Devina Haripersad Business Journalist
Devina is a passionate journalist covering the business beat, with a knack for uncovering the story behind the numbers. When she’s not exploring the latest developments in business and politics, Devina unwinds with long cardio sessions and sharing memes with friends who don't always get her dark sense of humour.

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