The South African Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC) has voted to hold interest rates for the third consecutive meeting.

This keeps the repo rate at 8.25%, with the prime lending rate at 11.75%.

The result was in line with economist and analyst expectations, which shifted in recent weeks to align with the view that the rate hike cycle has peaked and that the next move by the bank will be a cut.

While a hold was widely expected, shock inflation numbers on Wednesday did let some doubt creep in among analysts, particularly with narrow votes to hold emanating from the previous two meetings.

Fortunately, the vote to hold interest rates was unanimous this time around, with all committee members agreeing on the move.

Despite the unanimous vote, the central bank was slightly hawkish in tone, feeding expectations that rate cuts are still a while away, likely only coming through in the second half of 2024.

This comes as South Africa continues to face troubles with load shedding and logistical constraints, which generally increase costs, and expenditure pressure on households. Meanwhile, global markets are grappling with their own inflation issues, while global oil and commodity markets are also under pressure.

Overall, however, the bank sees the current economic environment as balanced – with the longer-term outlook more uncertain.

Reserve Bank governor Lesetja Kganyago said that while economic uncertainty persists in South Africa – and risks are to the upside – the current interest rate levels remain restrictive and are consistent with the inflation outlook.

The governor noted that South Africa’s headline inflation rate has increased more gradually than in many other emerging and advanced economies but still remains sensitive to shocks.

Inflation surprised on the upside for October, with Stats SA recording headline CPI up to 5.9% from 5.4% in September. This was largely driven by rising fuel prices and sticky food inflation.

While the Bureau for Economic Research’s inflation expectations survey showed a slight drop to 6.1%, Kganyago said the committee would feel more comfortable with this being rooted in the middle of the target range of 3% to 6%.

Despite this, with few significant changes to underlying components, the governor said that headline inflation is likely to end the year at 5.8%, revised down from 5.9% at the last meeting, and should average 5.0% in 2024 and stabilise at 4.5% in 2025 and 2026.

However, he warned that there are still serious upside risks to the outlook and said that the central bank’s decisions will always be data-dependent.

Reading between the lines, this means that future rate decisions could go either way, and will depend on the data at the time.

“The committee remains vigilant and stands ready to act should risks begin to materialise. The inflation and repo rate projections from the updated QPM remain a broad policy guide, changing from meeting to meeting in response to new data and risks,” he said.