No interest rate cut for consumers in SA, Reserve Bank Governor Lesetja Kganyago announces

Governor of the South African Reserve Bank, Lesetja Kganyago. File image.

Governor of the South African Reserve Bank, Lesetja Kganyago. File image.

Published May 30, 2024


The South African Reserve Bank (SARB) governor, Lesetja Kganyago, today announced that the interest rate in the country will remain unchanged.

This comes after the SARB’s monetary policy committee (MPC) met this week to decide on the country’s repurchase rate (repo rate), with the outcome, remaining at the 14-year high of 8.25%.

This means that the prime lending rate in South Africa would also remain at 11.75% per annum.

Kganyago said during his announcement, “We had an uncertain start to 2024, but recently, developments have been somewhat more positive. Inflation outcomes were worse than expected early in the year, leading to a repricing of rate expectations. There is still considerable uncertainty about the longer-run inflation outlook, globally. That said, inflation outcomes in the United States have been more benign recently, and markets still see some room for adjustments by the US Federal Reserve this year. We may also see easing by other major central banks.”

On the inflation monster, the governor said, “Turning to the outlook, we now see inflation stabilising at our 4.5 percent objective in the second quarter of next year. This is an improvement on our March forecast, which only reached this milestone at the end of 2025. The changes to the outlook, however, are not large when compared to our March forecast. Average headline inflation for 2025 is only a tenth of a percentage point lower. Clearly, the task of achieving our inflation objective is not yet done.”

“Considering this outlook, the MPC has decided to keep the repurchase rate unchanged at 8.25% The decision was unanimous,” he further said.

The Reserve Bank began the rate-hiking cycle in November 2021 as the economic hardship and the nationwide lockdown from the Covid-19 pandemic had started easing.

Coming a day after the national elections, many consumers would have been hoping that the MPC announcement would bring good news and a positive change for their monthly budgets, however, it was not the case due to the high levels of inflation.

However, headline consumer inflation has remained stubbornly high towards the upper limit of the SARB’s 3–6% target range, leaving the MPC hawkish until inflation is within the 4.5% midpoint.

Yesterday, Old Mutual Group chief economist Johann Els said that despite sharp easing in consumer goods inflation to 5.3% in April, the SARB was still very concerned about inflation expectations which precludes any immediate rate cuts this week.

Els pointed out that recent weeks have seen significant strength in the rand, which further complicates the decision-making process for the SARB.

“Even if the SARB had considered a rate cut, the timing would probably not have been appropriate given the proximity to the national elections and the potential volatility in the currency markets that might arise from the election results,” Els said.

The MPC will be meeting again in July later this year.