Reserve Bank likely to leave interest rates unchanged on Thursday
The South African Reserve Bank is likely to hold interest rates unchanged
The
The Reserve Bank cut interest rates by 25 basis points for three consecutive meetings last year, in the face of moderating inflation and lacklustre economic growth. But it kept the benchmark interest rate unchanged at 7.5% at the first policy meeting of 2025 in
Although tensions in the global and local environment have eased in May, compared with March, when steep
'While the global environment has become less tense, we still believe that persistent policy uncertainty will continue to push monetary authorities to err on the side of caution,' FNB's economic unit said in a note.
'However, the same uncertainty that kept the MPC cautious in March has not necessarily dissipated. In fact, one could argue that we now have an idea how much higher tariffs on SA could be without a bilateral trade deal or further extension of the pause ahead of the July deadline.'
It added that as the government's diplomatic efforts unfold, 'the MPC could choose to delay monetary policy moves and cater for any issues around sentiment and capital flows'.
Last week a delegation led by President Cyril Ramaphosa met US President Donald Trump to discuss
The Nedbank Group economic unit said in a note that although
The bank cautioned: 'The risk of renewed market volatility remains high due to fragile investor sentiment, battered by the relentless barrage of US policy changes.
'With the switch to a lower inflation target looming, the MPC will likely wait for more clarity.'
There are discussions about changing the inflation target, which comes after Reserve Bank governor Lesetja Kganyago last year signalled a desire to set a lower midpoint for the inflation target in line with global peers. The central bank has a mandate from the treasury to keep inflation within a 3-6% target band, with a midpoint of 4.5%.
The Reserve Bank will stay cautious until the global economy settles down and South Africa's domestic environment signals recovery, said Citadel chief economist Maarten Ackerman.
'The Reserve Bank is more focused on maintaining stability relative to the US dollar, to preserve the attractiveness of local assets and prevent further rand weakness. A surprise rate cut could lift consumer sentiment, but is unlikely given the Reserve Bank's transparent communication and conservative track record,' he said.
'If they haven't acted in previous windows of opportunity when inflation was low, it's unlikely that they'll surprise now.'
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