The Reserve Bank’s monetary policy committee left interest rates unchanged for the first time in months.
South Africans with debt could breathe a sigh of relief on Thursday afternoon after the central bank announced that it will keep the repo rate – for the time being – at 8.25%. The prime lending rate remains at 11.75%.
Lesetja Kganyago, president of the Reserve Bank, says three members of the Reserve Bank’s monetary policy committee voted in favor of an unchanged rate. Two committee members did favor another increase of 25 basis points.
Experts in the economy welcome the committee’s decision to keep the rate where it is, rather than push it up again.
“It was the correct decision given that inflation, as expected, has decreased over the last three months to 5.4% in June and now falls within the bank’s target band. The rand-dollar exchange rate has also strengthened,” says Samuel Seeff, chairman of the Seeff property group.
Kganyago conceded this afternoon that the country’s economic conditions have improved slightly; so much so that the Reserve Bank has adjusted economic growth for this year sharply upwards, from 0.3% to 0.4%.
However, the committee’s GDP growth forecast for 2024 and 2025 remains unchanged for now at 1% and 1.1% respectively.
Kganyago says the longer-term economic outlook looks less rosy due to the trajectory of inflation, ongoing geopolitical tensions and the effects of climate change.
The central bank is still of the opinion that it will be able to achieve lower interest rates in the future, provided it can steer inflation right in the middle of its target band of between 3% and 6%.
The repo rate is the rate at which the Reserve Bank lends money to commercial banks and means that South Africans pay less interest on their loans. However, investors get less returns with a lower repo rate.