In its latest move, the South African Reserve Bank (SARB) opted to keep the main lending rate steady at 8.25%, marking the third consecutive meeting with no changes.
The decision, aligning with economists’ predictions in a recent Reuters poll, underscores the bank’s commitment to a cautious approach.
SARB Governor Lesetja Kganyago, addressing a news conference, highlighted persistent challenges affecting the nation’s economic growth. Logistic bottlenecks, particularly in ports and rail operations, were emphasized as significant constraints.
“The operation of ports and rail… have become a serious constraint,” Kganyago noted.
South Africa, the continent’s most industrialized nation, has faced a decade of sluggish economic growth.
Issues such as frequent power cuts by state utility Eskom and disruptions at Transnet, the port, and freight rail company, have hampered various sectors, including mining and agriculture.
Inflation, a key concern, surged to 5.9% year-on-year in October, nearing the upper limit of SARB’s target range of 3%-6%.
Kganyago expressed displeasure at the uptick but reassured that the bank anticipates a return to the target range by 2025.
“The uptick in inflation is unwelcome,” Kganyago acknowledged.
While some analysts predict the first rate cut in early 2024, the SARB remains cautious about joining the global trend of rate reductions.
Jason Tuvey, deputy chief emerging markets economist at Capital Economics, noted, “The SARB is clearly in no rush to join the emerging market rate-cutting club.”
Elize Kruger, an independent economist based in South Africa, suggested that the SARB might have concluded its hiking cycle and hinted at the possibility of a future cut.
Prior to the recent “hold” decisions, the SARB had implemented ten consecutive rate hikes starting in November 2021.