South Africa

South Africa Monetary Policy January 2024

South Africa: SARB holds fire a fourth consecutive time in January

At its first scheduled meeting of 2024 on 25 January, the Monetary Policy Committee of the South African Reserve Bank (SARB) extended the pause in its tightening cycle, keeping the repurchase rate at 8.25% for the fourth consecutive meeting. The decision, which was unanimous, had been priced in by markets.

The SARB’s hold was a cautious decision; the Bank’s baseline scenario is for inflation to continue to gradually recede, but risks to the outlook remained skewed to the upside, in part because imported goods inflation is sensitive to rand weakness.

The SARB maintained its 2024 and 2026 headline inflation forecasts unchanged at 5.0% and 4.5%, respectively, while it maintained its core inflation forecasts for these two years at 4.6% and 4.5%, respectively. However, it upwardly revised its expections for both headline and core inflation in 2025 to 4.6%. As such, all six forecasts lie within the SARB’s 3.0–6.0% target band, and it sees inflation hovering around the mid-point of the target range from Q3 2024 onwards.

Regarding activity, the SARB left its GDP growth forecasts for 2024–2026 unchanged.

The SARB’s communiqué was void of explicit forward guidance. It once again stated that current policy was consistent with bringing both inflation and inflation expectations down to 4.5%—the mid-point of the target band. A majority of our panelists have penciled in the first interest rate cut for Q2. That said, a few see the loosening cycle beginning before the end of Q1, suggesting the SARB could cut the repo rate when it convenes next on 27 March.

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