By Kopano Gumbi, Bhargav Acharya and Tannur Anders
JOHANNESBURG (Reuters) -South Africa’s central bank kept its main interest rate unchanged for a seventh meeting in a row at 8.25% on Thursday, but for the first time since September the decision was not unanimous.
The South African Reserve Bank’s Monetary Policy Committee was split, with four members preferring an unchanged stance and two favouring a 25-basis-point rate cut.
Monetary policy has remained tight in Africa’s most industrialised economy as the South African Reserve Bank (SARB) tries to steer inflation back towards the midpoint of its 3%-6% target range.
Consumer inflation stood at 5.2% year on year in May, the latest month for which data is available, the same as in April.
Governor Lesetja Kganyago stuck to his usual hawkish tone, adding that although two members preferred a rate cut, the risks to the inflation outlook were now on the upside whereas they were viewed as broadly balanced at the previous meeting.
Key concerns for the central bank remain administered prices and services inflation, as well as stubborn global inflation.
Kganyago said the committee would prefer to see a couple of inflation prints fall before easing policy but stressed the bank was not backward-looking.
“You can’t drive a car just looking into the rear view mirror,” he told reporters on a virtual briefing. “You have got to look at our (inflation) forecast and based on that forecast take decisions cognizant of the risks,” he added.
Inflation expectations also remain “uncomfortably above” the central bank’s targeted midpoint of 4.5%, Kganyago said.
Economists polled by Reuters before Thursday’s announcement predicted a 25-basis-point cut in September followed by another in November.
David Omojomolo, Africa economist at Capital Economics, said it would be a close call but he now expected the SARB to cut rates by 25 bps in September.
Some analysts disagree, seeing the first cut coming at the November meeting.
“Given geopolitical risks, the U.S. election and its broader implications for emerging markets… we still lean to a first cut in November,” said Razia Khan, chief economist for Africa and Middle East at Standard Chartered.
(Editing by Alexander Winning)
