The South African Reserve Bank (SARB) has decided to keep interest rates unchanged, in line with the broader global monetary policy trend.
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), commented that the SARB’s decision to hold the repo rate steady was expected. While inflation expectations remain stable and the inflation outlook appears favorable, the SARB has expressed concerns about potential inflation risks, opting to maintain the current policy stance for now.
De Schepper noted that if favorable conditions such as cuts by the US Federal Reserve, lower oil prices, and a stronger rand persist, the SARB may consider rate cuts later in the year.
The decision to hold rates steady follows a trend observed by other global central banks, with the Swiss National Bank (SNB) being the only one to lower its interest rates recently. Meanwhile, the Bank of England (BoE) also kept its rates unchanged, showing less dovishness about future policy due to inflation concerns.
The People’s Bank of China has also kept its benchmark lending rates steady for the fifth consecutive month, while the US Federal Reserve kept its rates unchanged but slowed down its pace of quantitative tightening.
Despite concerns over the US economy, the Eurozone is showing positive signs, with Germany planning significant military and infrastructure investments. BER highlighted that the growing uncertainty around the US economy has led to expectations of rate cuts, which have contributed to a weaker dollar and supported the rand.
Neil Gopal, CEO of the South African Property Association (SAPOA), indicated that the SARB may follow the US Federal Reserve’s actions. He added that given South Africa’s stable February inflation rate of 3.2%, a small rate decrease would likely stimulate markets.
Professor Waldo Krugell from North-West University explained that the SARB kept the repo rate unchanged at 7.5%, following the Fed’s similar move. He also pointed out that domestic inflation remained stable, and the outlook is benign with a relatively strong rand and low oil prices. However, international volatility and trade tensions present risks to the economy.
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