SA Reserve Bank holds rates steady at 7% as inflation edges higher

Since September 2024 the Reserve Bank has cut rates by 125 basis points

- YOGASHEN PILLAY

THE South African Reserve Bank's (Sarb) Monetary Policy Committee (MPC) has kept the repo rate unchanged at 7%, Governor Lesetja Kganyago announced on Thursday, citing rising inflation pressures.

The decision that saw four members of the MPC preferring to keep rates on hold while two favoured a cut of 25 basis points, drew mixed reactions from economists, business leaders and labour unions.

Kganyago said global conditions remain broadly supportive of emerging markets, with easing monetary policy in the US and UK, a weaker dollar and firmer commodity prices offset by ongoing geopolitical tensions.

Domestically, headline inflation has picked up in recent months, mainly due to higher food and fuel costs.

"The pressure is coming mainly from meat and vegetables, as well as fuel prices, which have been declining at a slower pace than they were before. Meanwhile, underlying inflation remains contained, with core around 3%," Kganyago said.

"Inflation expectations also moderated further in the latest survey, which shows South Africans are getting used to lower inflation. We anticipate that headline inflation will rise over the next few months, peaking at around 4%."