South African central bank holds main rate amid inflation risks
South Africa's central bank opted to maintain its main lending rate at 8.25%, as announced in a unanimous decision by its monetary policy committee (MPC). This marks the third consecutive meeting in which the bank has held the repo rate steady.
Despite inflation experiencing a notable increase to 5.9% year-on-year in October from 5.4% in September, nearing the upper limit of the central bank's target range of 3%-6%, the bank chose to keep the rates unchanged. Central Bank Governor Lesetja Kganyago, addressing a news conference, expressed concern about the uptick in inflation in October, stating that "serious upside risks" to the inflation outlook persist.
Analysts are projecting a potential interest rate cut by the central bank in early 2024. However, some caution that the bank might delay its easing cycle due to persistent high inflation. The MPC of the South African Reserve Bank has emphasized its preference for inflation to consistently hover around the midpoint of its target range before contemplating any rate adjustments.
Points clés à retenir
In early trading on Friday, the South African rand continued to strengthen, building on the gains observed on Thursday following the decision by the central bank to keep its main interest rate unchanged. As of 0644 GMT, the rand was trading at 18.7700 against the dollar, showing a 0.3% increase compared to its previous close. Concurrently, the dollar was approximately 0.03% weaker against a basket of global currencies. Looking ahead to next week, investors are anticipated to focus on supply-side inflation as producer price index data is scheduled for release. In the early stages of trading, South Africa's benchmark 2030 government bond exhibited marginal strength, with the yield decreasing by 0.5 basis points to 10.120%.