The monetary policy committee (MPC) of the Reserve Bank has kept the repo rate steady at 8.25% but continued to warn about sticky inflation being a hindrance to cuts any time soon.
In his speech, governor Lesetja Kganyago said the Bank now expects inflation to return to the midpoint of its 3%-6% target band in the second quarter of next year.
This is an improvement from the previous MPC meeting in March where the committee expected to reach this goal only by the end of 2025.
Kganyago warned, however, that “the task of achieving our inflation objective is not yet done”.
“The committee remains concerned that inflation expectations are elevated.”
Regarding economic growth, Kganyago said economic activity in the first quarter was worse than expected “despite reduced load-shedding”.
While “we expect slightly weaker growth in the first quarter this should improve in the second”, he said.
The US Federal Reserve has been hawkish in recent communication, with most market participants believing rates may only begin to be lowered elsewhere after it makes its first cut.
The date of a potential first cut has been pushed out several times throughout this year. At the beginning of January, markets were forecasting total cuts by the Fed of 150 basis points this year. There is now some doubt that the first cut may only happen as late as December.
“There is still considerable concern” about the global inflation outlook, said Kganyago, while adding that recent inflation data had come out slightly better than expected.
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