The South African Reserve Bank defied expectations and held interest rates steady to support economic growth after revising its inflation forecasts lower, while warning that the renewed conflict in the Middle East could justify more tightening.
The six-member monetary policy committee maintained the benchmark policy rate at 7%, Governor Lesetja Kganyago told reporters in Pretoria on Thursday. Only three of 20 economists surveyed by Bloomberg had expected a hold. The rest predicted a 25 basis point increase.
“The inflation outlook has improved slightly since our last meeting, but inflation is still too high, while growth is weak,” Kganyago said. “We are setting policy to achieve 3% inflation over time, ensuring the current supply shock does not de-anchor inflation expectations.”
Four members backed the hold and two favoured a 25-basis point increase.
The committee highlighted risks to growth from weaker consumer and business confidence, while noting that most of the inflation overshoot has so far come from higher fuel costs. It said goods prices have been relatively well contained, while cautioning that for services inflation, conditions look problematic.
