South Africa keeps key rate on hold despite inflation hitting two-year high
EZA•Rand weakens after the decision
The rand weakened sharply on the decision to trade down 2% against the dollar on the day ZAR=D3.
The bank's Quarterly Projection Model now shows the policy rate broadly stable through the remainder of the year.
At the last rate-setting meeting in May, the central bank delivered its first rate hike in three years.
Inflation and growth forecasts revised
The central bank revised down its inflation forecast for this year to 4.0% from 4.4% previously and revised up its 2026 economic growth forecast to 1.4% from 1.2%.
Inflation accelerated to 5.0% year on year in June ZACPIY=ECI, 2 percentage points higher than the bank's 3% target.
But Governor Lesetja Kganyago told a press conference that inflation would be back within the bank's 1-percentage-point tolerance band by the end of next year and "bang on target" after that.
"We are in a difficult bind. The worst position for a central banker is to have rising inflation and weak demand," he added.
Central bank leaves policy rate unchanged
South Africa's central bank kept its main lending rate unchanged on Thursday, surprising investors and economists who had predicted another rate hike after inflation surged to its highest in two years last month.
The bank's policy rate stays at 7% ZAREPO=ECI, with the Monetary Policy Committee (MPC) saying its stance was appropriate with rates somewhat restrictive.
