Following South Africa’s surprise inflation announcement on Wednesday, all eyes shifted to the South African Reserve Bank, eagerly anticipating its final interest rate decision for the year. Despite inflation edging towards the upper boundary of the 3%-6% target at 5.9%, surpassing the previous consensus of 5.5%, and core inflation hitting 4.4% against the anticipated 4.3%, little changed in the market’s forecast for the repo rate to remain steady at 8.25%.
The SARB indeed upheld this rate, concluding its monetary policy decisions for the year with a unanimous vote. Yet, the expectation lingers that rates will persist at elevated levels until substantial progress is seen in bringing inflation back to the midpoint of the target range. The SARB further acknowledged these upside risks to inflation and vowed to remain vigilant, standing ready to act should any of these risks materialize. Future decisions will remain data-dependent and reactive to the balance of the risks of the economic outlook. Consequently, any prospects of the SARB initiating rate cuts seem likely to extend further into 2024.
Sources: South African Reserve Bank, News24
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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