Reserve Bank holds repo rate steady amid falling inflation

The Reserve Bank has decided to keep the repo rate unchanged at 8.25%.

The announcement by Reserve Bank governor Lesetja Kganyago on Thursday means the prime lending rate will also remain steady at 11.75%.

The move to maintain rates at current levels follows a series of hikes over the past 10 policy meetings.

However, the central bank’s latest decision reflects a cautious approach to monetary policy, coinciding with a significant decline in consumer inflation in June.

According to Statistics SA, consumer prices rose by an annual rate of 5.4% in June, down from 6.3% in May, marking a 20-month low.

Kganyago addressed the current state of policy, stating that it remains restrictive to combat still high inflation expectations and uncertainties in the economic outlook.

He also pointed out that significant upside risks to the inflation outlook continue to pose concerns.

“In light of these risks, the committee remains vigilant, and decisions will be data-dependent and sensitive to the balance of risks to the outlook,” he said.

“The policy stance aims to anchor inflation expectations more firmly around the mid-point of the target band, and to increase confidence in attaining the inflation target sustainably over time.”

Kganyago reiterated the monetary policy committee’s (MPC) commitment to disregard short-term price fluctuations.

Instead, it will concentrate on identifying possible secondary effects that could impact inflation expectations.

Kganyago said the primary goal remains guiding inflation back to the mid-point of the target range.

“The MPC will seek to look through temporary price shocks and focus on potential second-round effects and the risks of de-anchoring 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.”


Follow @SundayWorldZA on Twitter and @sundayworldza on Instagram, or like our Facebook Page, Sunday World, by clicking here for the latest breaking news in South Africa. 

Latest News