Deputy Governor Fundi Tshazibana of the South African Central Bank asserted a compelling argument for the prolongation of elevated domestic interest rates. This recommendation is grounded in the observable tightening of financial conditions and the concurrent escalation in the government’s borrowing requirements.
The inflation rate has approached the upper threshold of the South African Reserve Bank’s preferred target range, fluctuating between 3% and 6%. In October, the most recent month for which data is available, it reached 5.9%.
During its conclusive monetary policy meeting in November 2023, the central bank opted for stability by maintaining its primary lending rate at 8.25% (ZAREPO=ECI). This decision marked the third consecutive instance of the central bank refraining from rate adjustments, following a series of 10 consecutive hikes initiated in November 2021.
Tshazibana conveyed during a Bank of America conference in Johannesburg that a compelling argument persists for sustaining elevated domestic interest rates over an extended period.
Tshazibana explained this rationale, citing the imperative for increased government borrowing amidst elevated global interest rates, coupled with the perception of the country as posing a higher risk.