The welcome break for South Africans comes after the SARB increased the rate 10 consecutive times since November 2021.
The announcement follows behind the consumer price index showing significant cooling for June, decreasing to 5,4%, the lowest level in 20 months.
However, SARB governor Lesetja Kganyago warned that the central bank’s finger was not off the hiking trigger just yet.
“The Monetary Policy Committee decided to keep the repurchase rate at its current level of 8,25% per year. Three members of the committee preferred to keep the rate on hold and two preferred an increase of 25 basis points. Serious upside risks to the inflation outlook remain. In light of these risks, the committee remains vigilant and decisions will continue to be data dependent and sensitive to the balance of risks to the outlook,” Kganyago said.
He said entering the second half of 2023, near-term prospects for the global economy are broadly unchanged, with inflation easing and growth forecasts stable.
“The longer-term economic outlook, however, remains clouded by risks to the inflation trajectory, ongoing geopolitical tensions and the effects of climate change. In the developing world, many economies face high debt levels, weaker economic growth and prolonged adverse financing conditions. As a result, sub-Saharan Africa’s growth prospects remain muted,” he said.
While goods price inflation had eased in much of the world, core inflation remained elevated, keeping consumer price inflation from falling more sharply, Kganyago said.
“The SARB’s forecast for global growth in 2023 is revised marginally higher to 2,5% (from 2,4%), and remains unchanged at 2,7% in 2024. While South Africa’s economic conditions appear to have improved, the longer-term outlook mirrors the uncertainty of the global environment. Prices for commodity exports continue to weaken. In addition, energy supply remains unreliable and stronger El Niño conditions threaten the agricultural outlook.”
For 2023, the bank’s forecast for South Africa’s GDP growth is slightly higher than in May, at 0,4% (from 0,3%), he said.
“Energy and logistical constraints remain binding on the growth outlook, limiting economic activity and increasing costs.”
He said the GDP growth forecast for 2024 and 2025 was unchanged from the committee’s previous meeting in May, at 1% and 1,1% respectively.
Turning to inflation prospects, he said: “South Africa’s external financing needs are expected to rise due to expansion in the current account deficit. Despite somewhat lower oil prices, falling export commodity prices are forecast to result in a current account deficit of 1,9% of GDP this year.”
He said the trajectory of South Africa’s headline inflation rate had been shaped primarily by fuel, electricity and food price inflation.
