JOHANNESBURG, March 20 (Xinhua) -- The South African Reserve Bank (SARB) has kept the repo rate unchanged at 7.5 percent due to inflation remaining within the target range, the central bank announced on Thursday.
Lesetja Kganyago, governor of the SARB, made the remarks while announcing the decision of the Monetary Policy Committee (MPC). He said four committee members preferred maintaining the repo rate at 7.5 percent, while two favored a 25-basis-point cut.
The governor said the global economy is experiencing "extreme levels of uncertainty," with escalating trade tensions and abrupt shifts in longstanding geopolitical relationships.
"Turning to prices, while inflation remains in the lower half of our target range, it has edged higher over the past few months. We continue to see low inflation for goods, which is likely temporary. Services inflation is somewhat higher but still below the 4.5 percent target midpoint. Inflation expectations remain close to the midpoint. For now, inflation appears contained," Kganyago said.
According to him, the SARB projects headline inflation at 3.6 percent in 2025 and 4.5 percent in 2026, driven by improved fuel price forecasts. He said that this, along with lower electricity tariffs announced by the National Energy Regulator of South Africa in February, would help offset pressure from the value-added tax (VAT) increase. During his budget presentation last week, Finance Minister Enoch Godongwana announced a 0.5 percentage point VAT hike for the 2025/26 financial year, which begins on April 1.
"Against this backdrop, the MPC decided to keep the policy rate unchanged at 7.5 percent," Kganyago said.
Riaan Grobler, head of advisory services at Everest Wealth, South Africa's private investment and wealth management company, said they anticipate possible changes in May.
"There is a chance that the interest rate may be cut in May when there is more clarity about what is happening with inflation, the impact of the increased energy tariffs, U.S. President Donald Trump's trade policies, and the proposed VAT increase," Grobler said.
"It is now a case of wait and see regarding the impact of the Trump administration's policies, including the possibility of higher inflation due to Trump's trade tariffs," he added.
Grobler also noted that the U.S. Federal Reserve (Fed) has kept interest rates unchanged for the second consecutive time, which may have influenced the SARB's decision.
"The Reserve Bank is therefore following a similar path to the Fed and is becoming increasingly cautious in its outlook for both inflation and future interest rate cuts. However, the Fed still expects two rate cuts this year," he said.
According to him, since November 2021, the SARB has raised interest rates by 475 basis points but has only reduced them by 75 basis points so far.
