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Pretoria - South African Reserve Bank (Sarb) governor Lesetja Kganyago on Thursday announced interest rates will remain steady at 7%.
The prime lending rate therefore stays at 10.5%.
Download the full announcement
South Africans have already seen a total interest rate increase of 100 basis points since November last year.
Despite higher-than-expected headline inflation at 6.4% in October, the Sarb kept interest rates unchanged amid low economic growth and subdued consumer spending.
Analysts have encouraged consumers to use this period of stable interest rates to create greater personal financial stability.
"We continue to see stable credit health across our consumer and business sectors indicating that the majority of customers are weathering current tough conditions. I urge customers experiencing difficulty to approach their bank to restructure loans rather than defaulting,” said FNB CEO Jacques Celliers.
Kganyago said the central bank expects core inflation to peak at 5.8% in the fourth quarter, remaining within the target range.
It was no massive surprise as the MPC kept rates on hold, said TreasuryOne.
The rand, which was trading at R14.21 just before the announcement, held steady and was trading at R14.24/$ on account of international pressures from the stronger dollar.
A rate cut was not discussed, but the MPC may be close to the end of the hiking cycle, provided that the upside risks to inflation do not transpire, said Kganyago.
US election impact
On the impact of the US election on SA, Kganyago said the outcome presents some uncertainty around policy. However, Kganyago said the MPC does not follow “pound for pound, basis point for basis point” what the US policy does.
The tightening cycle started to deal with the challenges South Africa is facing. “This time it is no different, we will assess what the US rate hike means for South Africa” he said.
“We need to be guided by whether the rate hike is fully priced in the current financial market,” he added. If the effects are not fully priced in, the reaction would be to raise rates, he explained.
If the US raises rates because the economy has recovered, and is strong and creating jobs, it will be good for the global economy. “South Africa should benefit if the global economy is doing well.”
If the US raises rates, there will be repricing within financial markets, followed by the dollar strengthening against other currencies.
He said there will be a global realignment of exchange rates as a result. In South Africa, if prices rise as a result of a depreciation of the currency to the dollar, then the policy will respond to such second-round effects.
“The policy will respond to consequences of a rise in US rates - not because of the rise in US rates,” Kganyago said.
