Renewed geopolitical tensions had reintroduced upside risks to inflation through higher oil prices.
A resilient rand and easing oil prices have strengthened the case for the South African Reserve Bank (SARB) to leave interest rates unchanged on Thursday, although sticky core inflation and rising inflation expectations continue to argue for a rate hike.
The Monetary Policy Committee's (MPC's) Thursday decision is expected to be another close call, with economists divided over whether the central bank will tighten monetary policy again or keep the repo rate unchanged.
Reserve Bank Governor Lesetja Kganyago has previously described the exchange rate as an important part of monetary policy transmission.
“Higher rates support the exchange rate, which gives us more favourable import prices. The exchange rate channel is an important part of monetary policy transmission,” he said at the Bureau for Economic Research Annual Conference in early June.
