Cape Town — The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) announced the unanimous decision to keep the repo rate at 8,25%, despite inflation increasing by 5,6%.
SARB governor Lesetja Kganyago explained all the factors that went into making the decision and highlighted global inflation, rising food prices, a growing exchange rate, as well as South Africa’s poor economic performance in the last quarter of 2023.
“Since the start of the year, we have seen persistent global inflation pressures. Headline inflation rates are generally lower than they were a year ago, but underlying inflation is still elevated. Goods inflation has declined significantly, as supply shocks wear off, but there is evidence of stronger inflation in services, across a range of economies.” Kganyago said.
The South African Reserve Bank MPC decided to keep the repurchase rate at its current level of 8.25% per year. The decision was unanimous. #SARBMPCMAR2024 pic.twitter.com/gTPsUXQ5XC
— SA Reserve Bank (@SAReserveBank) March 27, 2024
He noted that South Africa performed poorly in the last quarter of 2023, with the economy expanding by just 0,1%, with a 0,6% expansion for the year. He cited load shedding and poor port and rail performances as the primary factors. He did forecast moderate growth for the next 3 years.
“While we estimate electricity shortages took 1.5 percentage points off GDP last year, we think this will moderate to 0.6 percentage points this year and 0.2 percentage points in 2025. Overall, we see growth at 1.2% this year, improving to 1.6% by 2026.”
Turning to South Africa, the economy performed worse than expected in the fourth quarter of last year, expanding just 0.1%. Growth for 2023 as a whole was 0.6%. The main reason for this bad performance was supply-side problems. Electricity loadshedding was worse than in previous…
— SA Reserve Bank (@SAReserveBank) March 27, 2024
Kganyago said the rand traded poorly against other currencies since the last MPC, mainly due to interest rates staying high among stronger economies and the currency remaining under pressure from weakening terms of trade.
Considering the exchange rate, the rand has been trading somewhat weaker than we expected at our last MPC meeting. This is partly due to interest rates in the major advanced economies staying high for longer. The currency is also under pressure from weakening terms of trade.…
— SA Reserve Bank (@SAReserveBank) March 27, 2024
He emphasised that stabilising inflation at the mid-point of the target band will improve the economic outlook and reduce borrowing costs.
“We reiterate the views of the MPC on additional measures that would improve economic conditions. These include achieving a prudent public debt level, improving the functioning of network industries, lowering administered price inflation and keeping real wage growth in line with productivity gains.”
Finally, we reiterate the views of the Committee on additional measures that would improve economic conditions. These include achieving a prudent public debt level, improving the functioning of network industries, lowering administered price inflation, and keeping real wage…
— SA Reserve Bank (@SAReserveBank) March 27, 2024
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Compiled by Matthew Petersen
