While it is sensible to expect a rate-cutting cycle to begin soon, it might be a short and shallow one.
Over the course of 2023, the South African Reserve Bank raised the repo rate from 7.00% to a 14-year high of 8.25%. In the first Monetary Policy Committee meeting of 2024, Lesetja Kganyago, governor of the Sarb, largely echoed his prevailing sentiments regarding the serious upside risks to inflation, with the committee unanimously voting to keep the repo rate unchanged.
Kganyago also remains concerned regarding the inflationary read-through from load shedding and the logistical constraints at SA ports and along Transnet’s rail network. While these constraints have the capacity to continue to raise the local cost of production, the caveat is that the damage should be more muted than that caused during the peak Stage 6 load shedding of 2023.