Reserve Bank has done enough – economist
Stanlib chief economist Kevin Lings said, based on the current trajectory of inflation and its own data, the South African Reserve Bank has “done enough”, and a pause in the hiking cycle is warranted.
June’s inflation data was released yesterday and revealed that annual consumer price inflation (CPI) had dipped below the upper end of the Reserve Bank’s target range of 3% to 6% for the first time in 14 months.
Lower food and fuel inflation – the main drivers of inflation – saw annual CPI reach 5.4% in June – the lowest it has been since October 2021.
While inflation has not yet reached the mid-point of the range, which the SARB aims for, Lings told Newzroom Afrika that he expects inflation to remain within the target band for the rest of 2023.
He said inflation is “moving in the right direction” and, while there are still some upside risks to inflation, a pause in the interest rate hiking cycle is warranted.
The SARB’s Monetary Policy Committee (MPC) will announce its interest rate decision today, and many experts believe June’s positive inflation data could convince the committee to pause its current hiking cycle.
The MPC has been in a hiking cycle since November 2021, implementing ten consecutive rate hikes and a cumulative 475 basis points of hikes.

Lings said the positive inflation outcome in June should have a meaningful impact on the MPC’s decision today.
The Reserve Bank has said before that it is data-dependent and will, therefore, make decisions based on all the data available to them, particularly important data like inflation.
“It should be a significant factor they take on board. If you look at where the numbers came out, they definitely surprised on the downside and, more than that, they are now nicely inside the target,” he said.
“In terms of just that inflation data alone, that’s fairly compelling that the SARB has done enough in terms of interest rates and perhaps could avoid a further rate hike.”
In addition, the rand has strengthened significantly from where it was at the last MPC meeting in May and will, therefore, not be as big of a consideration at today’s meeting.
Internationally, inflationary pressures have also started easing, which is another consideration that could point to an interest rate pause.
“I’m hoping that the MPC leaves rates unchanged and that they decide they’ve done enough,” he said.”
“As long as inflation continues to move lower, then perhaps they can keep rates on hold, but if inflation doesn’t behave, they would have to resume the rate hiking cycle.”
“From my perspective, I think they’ve put through enough rate hikes already.”
*Headline image source: World Economic Forum / Jakob Polacsek
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