Reserve Bank holds repo rate at 6.75% amid growing inflation risks

The South African Reserve Bank (SARB) has opted to keep the repo rate unchanged at 6.75%, citing significant concerns regarding inflationary risks fueled by rising oil prices and geopolitical uncertainty stemming from the conflict in the Middle East.

Governor Lesetja Kganyago noted that the ongoing war is expected to be a primary driver of inflation in the coming months.

Headline inflation is now projected to hit 4% during the second quarter (April to June).

Kganyago highlighted several looming shocks to the economy:

Energy Costs: Prices are expected to rise as early as next week.

Petrol Prices: Forecasts suggest a record-breaking increase of over R5 per litre, marking the highest hike in recent years.

Fuel Inflation: Projections for fuel inflation have been revised upward, with an expected surge to 18% in the second quarter

"We are still only a few weeks [into the conflict]; the coming months will be crucial for assessing the longer-term inflation consequences," Kganyago said. "Given current forecasts, we see inflation risks to the upside. Against this backdrop, the MPC decided to keep the policy rate unchanged at 6.75%."