The latest Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) statement was again surprise-free, the committee having, for the sixth time over the past year, kept interest rates unchanged.

In commenting on the decision by the MPC to again leave interest rates unchanged, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says that, as expected, borrowing costs will therefore remain higher for consumers and business for longer.

“The MPC now believes core inflation will reach the desired target of 4,5% sooner – by the second quarter rather than the fourth quarter of 2025 – as it now sees the risks to inflation as balanced instead of on the upside.

He says that, in any event, it is unlikely that interest rates will be cut until much later in 2024, depending also on a reduction in inflationary expectations and on the timing of any interest rate cuts by the US Fed.

“The MPC reaffirmed its gross domestic product (GDP) growth forecast of 1,2% for 2024, while still seeing the risks to the growth outlook as ‘balanced’.”

Prof Parsons points out that the MPC also emphasised that a positive factor in the growth outlook would be if the current progress in suspending load-shedding is sustained for the rest of the year. It emphasises the extent to which South Africa’s investment and growth prospects hinge on a sustainable solution to its energy crisis.

“A dominant theme in the MPC statement was ‘unusually elevated uncertainty’ in assessing the economic outlook, including political uncertainty in South Africa and trends in the country risk premium.”

Prof Parsons says the quarterly NWU Policy Uncertainty Index (PUI), due at the end of June, will again calibrate any changes in the level of policy uncertainty in the aftermath of South Africa’s pivotal 2024 elections on 29 May.