The decision by the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) to leave the repo rate unchanged highlights the role of non-model-based judgement in policy choices, especially in current uncertain circumstances.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says this decision that was made by the MPC on 20 March was decided by a 4 to 2 vote.

“Since the MPC’s previous meeting in January, highly elevated levels of global and domestic policy uncertainty have convinced a majority of MPC members to pause in its interest rate-easing cycle. The MPC now awaits greater clarity around these developments in the months ahead.”

Prof Parsons says from the MPC statement it is evident that inflation trends in South Africa are now basically converging around the 4,5% midpoint of the inflation target range – yet monetary policy is nonetheless still in restrictive territory.

“Scope therefore still exists for resumed cuts in borrowing costs for business and consumers later in the year. There also appears to be a minority view within the MPC that interest rates could still be further reduced to support economic recovery.”

He points out that on the growth front the MPC has slightly reduced its 2025 gross domestic product (GDP) growth forecast to 1,7%, and a similar 2026 growth projection remains unchanged. On the downside, the MPC sees risks to the growth outlook. At a time when South Africa needs to see much higher inclusive economic growth it is disappointing that the MPC has found it necessary to trim its 2025 growth forecast.

“It also suggests that the 2025 growth rate assumption of 1,9% in the amended Budget may be too optimistic. The MPC has already previously emphasised that only accelerated structural reforms can ensure that South Africa can reach the desired growth rate of the Government of National Unity (GNU) of 3% by, say, 2027.”