Reserve Bank keeps repo rate at 8.25% and prime rate at 11.25%

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The Reserve Bank’s Monetary Policy Committee left interest rates unchanged on Thursday. The Repo rate remains at 8.25% while the prime rate stays at 11.25%.

Governor Lesetja Kganyago says the Bank now sees inflation stabilising at 4.5% by the second quarter of next year.

It is an improved outlook on its March forecast but he adds that the Bank’s task of achieving its inflation objective was not yet done.

As expected by market observers, the Reserve Bank kept its rates unchanged. This means that businesses and households will continue to have to shoulder 14-year-high interest rates.

Economist at Momentum Investments Sanisha Packirisamy says, “We saw across the MPC that it was a unanimous decision to keep interest rates steady. Some of the interesting components.”

The Bank notes that economic growth in the first quarter of this year was likely to come under pressure, but that the second quarter would likely compensate with higher growth, indicating that its forecast of 1.2% economic growth for 2024 remained.

The Governor also cautiously welcomes the recent steady supply of power, the lack of which has adversely impacted growth.

SARB Governor Lesetja Kganyago says, “The recent improvement in the power supply, with no load shedding since 26 March, is a welcome development. We have revised our load shedding assumption down, but additional revisions may be required if this performance is sustained.”

While the Governor seems to suggest that the beginning of interest rate cuts looked more likely next year, economists say the SARB’s quarterly projection model still suggests that rates could be cut by as much as 65 basis points this year.

Packirisamy says Momentum Investments is still holding out for 2 rate cuts before the year ends.

Video: Governor Lesetja Kganyago delivers the MPC Statement