The Reserve Bank yesterday held interest rates as expected, saying headline inflation would now reach the 4.5% target only at the end of 2025, later than previously expected, reports BusinessLIVE.

‘We still see headline inflation heading back to 4.5%. However, given extra inflation pressure, headline now reaches the target midpoint only at the end of 2025, later than previously expected. As a result the policy rate in our baseline forecast also starts normalising later,’ the bank’s monetary policy committee said in its statement.

Its hawkish tone will feed into market expectations that now see the committee starting to cut rates as late as November, with global markets expecting the US Federal Reserve to keep rates higher for longer – a prospect that will weigh on emerging-market currencies including the rand.

The bank’s monetary policy committee said global inflation pressures had persisted and major global central banks were now expected to cut rates at a slower pace and to start cutting at a later stage.

SA’s return to the inflation target had been slow, and the most recent inflation numbers showed yet another delay on the way to its 4.5% objective, the committee said.

Core inflation had risen, driven by services inflation, which was now at its highest level since 2019. 

‘This suggests that SA is joining the global trend of services, rather than goods, becoming a major source of inflation,’ the MPC said in the statement.

The bank has improved its projections for economic growth, which it now expects to rise to 1.2% in 2024 as electricity and port and rail problems subside.

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