South Africa: SARB holds fire a third consecutive time in November
At its last scheduled meeting of the year on 21–23 November, the Monetary Policy Committee of the South African Reserve Bank (SARB) once again extended the pause of its tightening cycle and left the repurchase rate unchanged at 8.25%. The decision, which had been priced in by markets, was the third consecutive hold. In contrast to September’s meeting, the decision was unanimous.
In October, headline inflation rose again, nearing the upper bound of the SARB’s 3.0–6.0% target band, while core inflation eased for a second consecutive month. Moreover, the SARB downwardly revised headline and core inflation expectations for 2023 and 2024—all four metrics were lowered by 0.1 percentage points—and kept expectations unchanged for 2025. All six of these numbers were within the SARB’s target band, with both headline and core inflation projected to be at the mid-point of the target range in 2025. Nevertheless, the SARB noted that risks to the inflationary outlook remained skewed to the upside and included the evolution of the rand against the USD, the El Niño weather pattern, logistical constraints and the price of both electricity and key imports.
Regarding activity, the SARB upwardly revised its GDP growth forecast for 2023–2025.
Concerning future policy moves, the SARB did not provide explicit forward guidance, but it reaffirmed its willingness to resume the tightening cycle if its upside inflationary risks materialize. The Bank also stated it would maintain a policy rate level that would anchor inflation expectations at 4.5%—the mid-point of the target range.
Our panelists believe the tightening cycle has now concluded, and some expect the loosening cycle to begin as early as Q1 2024.
The next monetary policy meeting is scheduled for 25 January 2024.