The South African Reserve Bank (SARB) Monetary Policy Committee has decided to keep the repo rate steady at 7.5%, maintaining the prime lending rate at 11%. SARB Governor Lesetja Kganyago cited economic uncertainty, and inflation risks as key factors behind the decision.
“The global economy is facing extreme uncertainty. Trade tensions have escalated, and longstanding geopolitical relationships are shifting abruptly. Under these conditions, the economic outlook remains unpredictable,” Kganyago stated.
While South Africa experienced modest economic growth in the fourth quarter of last year, Kganyago explained that this was primarily driven by household spending, supported by lower inflation and withdrawals from the two-pot pension system. However, overall economic performance remained sluggish.
“The broader growth picture was disappointing, with several sectors underperforming. Growth for 2024 came in at 0.6%, slightly below our expectations and weaker than in 2023. Our 2025 growth forecast has now been revised to 1.7%,” he said, attributing the lower outlook to subdued demand and lingering supply constraints.
Economic analysts widely expected the SARB’s decision. Economist Ulrich Joubert noted that heightened global uncertainty, particularly in the United States, played a significant role.
“As anticipated, the Reserve Bank kept interest rates unchanged. One key factor is ongoing international uncertainty, particularly in light of policy shifts under the Trump administration. Financial market volatility and concerns over the U.S. economic direction have also contributed to this decision,” Joubert explained.
Speaking on VOC’s NewsBeat, Chief Economist for the Bureau for Economic Research, Hugo Pienaar, echoed these sentiments.
“The majority of analysts expected no change in the repo rate, given the multiple uncertainties the Reserve Bank is navigating,” he said.
Pienaar added that low inflation further supported the decision.
“This week’s Consumer Price Index (CPI) for February came in at 3.2% year-on-year, significantly below the Reserve Bank’s historical target of around 4.5%,” he noted.
VOC News
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