South Africa Unexpectedly Holds Rates as it Flags Growth Risks

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Or sign-in if you have an account.(Bloomberg) — The South African Reserve Bank defied expectations and held interest rates steady to support economic growth after revising its inflation forecasts lower, while warning that the renewed conflict in the Middle East could justify more tightening.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe six-member monetary policy committee maintained the benchmark policy rate at 7%, Governor Lesetja Kganyago told reporters in Pretoria on Thursday. Only three of 20 economists surveyed by Bloomberg had expected a hold. The rest predicted a 25 basis point increase.“The inflation outlook has improved slightly since out last meeting, but inflation is still too high, while growth is weak,” Kganyago said. “We are setting policy to achieve 3% inflation over time, ensuring the current supply shock does not de-anchor inflation expectations.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againFour members backed the hold and two favored a 25-basis point increase.The committee highlighted risks to growth from weaker consumer and business confidence, while noting that most of the inflation overshoot has so far come from higher fuel costs. It said goods prices have been relatively well contained, while cautioning that for services inflation, conditions look problematic.While policymakers held steady as oil and urea prices spiked this month after the intensification of fighting between the US and Iran, they outlined a scenario in which they would need to hike again if consumer prices remain persistently above their 3% target and spills into food costs and core inflation. The fallout from the Middle East conflict has impacted inflation across the world. South Africa’s decision follows rate holds in Nigeria and Canada this month and hikes in Ethiopia and South Korea.South African inflation rose at its fastest pace in two years in June to 5%, moving further away from the central bank’s 3% target. It is forecast to stay about 4% until early next year and is now seen averaging 4% over 2026 as a whole, compared with 4.4% previously.Officials see economic growth at 1.4% this year, compared with a previous forecast of 1.2% while warning that it could slow in the second and third quarters.Their closely watched quarterly projection model showed adjustments for the policy rate to 6.79% by year end from 6.7%.The Next Africa newsletter runs every weekday. Sign up here for the newsletter, and subscribe to the Next Africa podcast on Apple, Spotify or anywhere you listen.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.