No surprise that SA Reserve Bank left repo rate unchanged at 8.25% - economists

CAPE TOWN - Economists said it comes as no surprise that the South African Reserve Bank (SARB) left the repo rate unchanged at 8.25%.

The bank's Monetary Policy Committee (MPC) remains concerned about elevated inflation expectations, which remain in the upper half of the inflation target range.

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Average inflation expectations for 2025 are 5%, and marginally lower at 4.9% in 2026.

However, the bank did indicate that it thought inflation expectations should moderate going forward.

North West University Business School economist Professor Raymond Parsons said the fact that it was a divided vote of 4 to 2 suggested a possibility of rate cuts later in the year.

"If the gradual decline in the inflation outlook and inflation expectations continues, then the first cut in interest rates may even come at the Monetary Policy Committee's next meeting in September."

Chief economist at Sanlam Investments Arthur Kamp said it's encouraging that the committee noted the inflation outlook has improved.

"As a guide, the quarterly projection model of the bank is useful, and it indicates a repo rate of 7.29% at the end of 2025. So that gives us some indication of what the outcome may be over the next 12 to 15 months."

Meanwhile, the Congress of South African Trade Unions (COSATU) and the South African Federation of Trade Unions (SAFTU) have lashed out at the South African Reserve Bank for failing cash-strapped South Africans with its decision not to cut interest rates.

SAFTU's Trevor Shandu said this would burn further holes in the pockets of already cash-strapped South Africans.

"If you look at the inflation rate which is highlighted mainly by the rise in food prices, in fuel price, and transport prices, we have seen that the combination of both actually leads to the further impoverishment of working-class and middle-class people.”

COSATU's Matthew Parks said he hoped the bank would do the right thing and give relief to workers.

"We simply cannot afford to squeeze the economy any longer. We need to inject liquidity into the economy, we need to help put money in workers' pockets, we need to help workers pay for their debts to take care of their families, and of course, we need to help businesses to pay workers and hire new staff to expand their operations."