Economists react to SARB's interest rate decision

The South African Reserve Bank has decided to maintain the repo rate at 7%, a move that was in line with market expectations. The decision comes amidst a backdrop of global economic uncertainty, both in terms of the external environment and domestic demand. The Chief Economist at economist.cosa, Mike Schusler, and Chief Economist of NAFCOC, Landi Womashlangu, joined CNBC Africa to discuss the implications of the SARB's decision. Both economists pointed out the measured and cautious approach taken by the Reserve Bank, highlighting the various risks and uncertainties that could impact the South African economy. One of the key themes that emerged from the discussion was the impact of global events on the local economy. The unexpected outcome of the American election, particularly the uncertainty surrounding President Trump's policy decisions, has had a significant impact on commodity prices and currency markets. The economists noted that these developments have added to the existing challenges facing the South African economy. Looking ahead, the economists discussed the growth projections put forth by the Reserve Bank. While the forecasts indicate a marginal improvement in GDP growth for the coming years, both Schusler and Womashlangu raised questions about the sustainability of this growth. They highlighted the need for a diversified and resilient economy that can withstand external shocks and support sustainable growth. Furthermore, the discussion touched on the relationship between wages and inflation in South Africa. With inflation outpacing wage growth for the fifth consecutive month, consumers are facing increasing pressure on their purchasing power. The tough retail environment and subdued consumer demand have exacerbated the challenges faced by various sectors of the economy. In conclusion, the economists emphasized the need for a comprehensive and strategic approach to navigating the current economic landscape. While the SARB's decision to hold the repo rate steady provides stability in the short term, addressing the underlying structural issues and promoting sustainable growth will be crucial for the long-term prosperity of South Africa.