South Africa: South African Reserve Bank stays put in July
At its meeting on 18 July, the South African Reserve Bank (SARB) held fire again, leaving the repurchase rate at a 15-year high of 8.25%. The hold was the seventh in a row and had largely been priced in by markets. However, this time the decision was not unanimous; two of the six members voted to start the loosening cycle with a 25 basis point cut.
The decision to hold was driven by inflation remaining near the upper limit of the target range through May and the SARB’s assessment that risks to the inflationary outlook are skewed to the upside, tilting the balance to a hold, rather than a cut. The Bank deemed it necessary to maintain a restrictive stance to stabilize inflation and inflation expectations at 4.5%—the midpoint of its target band.
More positively, the inflation outlook improved: The SARB downwardly revised its 2024 and 2025 headline inflation projections to 4.9% and 4.4%, respectively, and left its figure for 2026 unchanged at 4.5%. Similarly, core inflation forecasts were slashed to 4.6% and 4.4% for 2024 and 2025, respectively, and left unchanged at 4.5% for 2026. Accordingly, all six projections are now seen close to the SARB’s 4.5% target.
Regarding activity, the Bank reduced its 2024 GDP growth forecast by 0.1 percentage points to 1.1% and raised those for 2025–2026 by the same amount—to 1.5% and 1.7%, respectively.
The SARB did not provide explicit forward guidance and only reiterated that its decisions “will continue to be data dependent, and sensitive to the balance of risks to the outlook”. All our panelists—bar one—expect the SARB to cut rates by 25–50 basis points this year. The next meeting is set for 19 September.