South Africa’s central bank pauses rate hike on growth concerns

The central bank of South Africa remained on hold at its monetary policy meeting held Thursday, pausing for a while from the continuous cycle of hikes, owing to slowdown in the economic growth of the country. It is expected to resume rate hikes, once prices in the economy start recovering.

The central bank left its benchmark repo rate unchanged at 7 percent, largely in line with Reuters forecast. Also, the survey suggested a median forecast pointing to a 25 basis point increase at its November meeting to tame inflation pressures.

The Reserve Bank has raised rates by 200 basis points since early 2014, though it also kept them on hold in May. Although inflation was likely to remain above the central bank's 3 to 6 percent target until late 2017, it said the inflation forecast was more benign than at its last policy meeting in May, Reuters reported.

Moreover, the central bank Governor Lesetja Kganyago said that the growth outlook of the country remained extremely challenging, with Africa’s most developed country likely to maintain a steady growth this year compared with earlier forecasts of a 0.6 percent expansion.

Meanwhile, the Governor also said that besides the pessimistic growth forecast, several other factors contributed to the decision to remain on hold. These included slow growth in inflation and appreciation in the South African rand that gained ground both against the USD as well the GBP.