By Ebi Kesiena
South Africa’s Reserve Bank decided to halt interest rate hikes on Thursday for the first time since November 2021, but Governor Lesetja Kganyago noted that the pause did not mean an end to the hiking cycle.
The Bank’s Monetary Policy Committee (MPC) kept rates at 8.25% as inflation forecasts came in lower than previous ones and economic conditions improved.
Kganyago said future rate decisions would continue to depend on economic data and risks to the inflation outlook.
Addressing a press conference, Kganyago stated that the country was still in the woods as the hike may not come to an end soon.
“Have interest rates peaked? The answer is a resounding ‘no’. Is this the end of the hiking cycle? No, it is not. It depends on the data and risks, that is what it boils down to.”
As at Wednesday, official data indicated that consumer inflation fell within the Reserve Bank’s target range of between 3% and 6% for the first time in 14 months.
The rand fell in the aftermath of the rate decision.
The Reserve Bank is now projecting inflation will average 6% in 2023 compared to a 6.2% forecast in May. The Bank expects inflation to fall back to the midpoint of the target range sustainably only by the third quarter of 2025.
GDP growth is forecast at 0.4% in 2023, revised up slightly from 0.3%.
However, South Africa’s economic conditions appear to have improved,” the bank said in its MPC statement, while cautioning that the longer-term outlook remained uncertain amid ongoing power cuts, logistical bottlenecks and as sustained food price pressures pose a risk to inflation.
