The South African Reserve Bank maintains its hike pause - in line with the Fed and Bank of England

SOUTH AFRICA - Report 21 Sep 2023 by Iraj Abedian

The Reserve Bank’s Monetary Policy Committee (MPC) voted to keep the benchmark interest rate unchanged at 8.25% for the second consecutive meeting, which also left the prime lending rate at 11.75%. The continued halt keeps total interest rate increases since policy normalization began in November 2021 at 475 basis points.

Getting a grip on the current inflation is proving to be quite an unpredictable process. While annual consumer price inflation (CPI) decelerated for five consecutive months from March 2023, including by 0.7 of a percentage point from June to July, the latest inflation figures released by Statistics South Africa (Stats SA) indicate that inflation increased from 4.7% y/y in July to 4.8% y/y in August 2023. Nonetheless, the inflation rate is still 1.2 percentage points below the Reserve Bank’s upper band of the inflation target range, with August representing three consecutive months during which the annual change in the consumer price index was within the target range (of 3%-6%). The country’s real interest rate (i.e., the prime rate minus the inflation rate) has climbed to 695 bps from 215 bps in August 2022.

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