Reserve Bank governor Gill Marcus has announced that the repo rate – the scale at which the central bank lends money to commercial banks – will remain unchanged at 5%.
The decision means that the prime lending rate from banks to consumers will stay at 8.5%.
The announcement, which came at the end of the monetary policy committee's three-day meeting in Pretoria, fulfilled almost consensus expectations among analysts.
Bloomberg surveyed 22 economists and all of them predicted the rate would remain unchanged.
There was some speculation in recent weeks that Marcus would cut the repo rate, but investors largely withdrew from this when Statistics South Africa announced on Wednesday that October inflation had fallen lower than expected.
September's consumer price index (CPI) inflation rate was 6% on the year, but it fell to 5.5% for October, a figure that signalled some reprieve for consumers and drove back the need for an added measure to stimulate spending.
Stable rate
The repo rate has remained unchanged since July last year, when it was docked by half a percentage point.
In the main, analysts have considered this the most appropriate action for South Africa’s current economic conditions.
"We expect no hike in interest rates as there is absolutely no need for any," Investec Bank group economist Annabel Bishop said on Wednesday.
"It would be inappropriate for the monetary policy committee to come out with a hawkish statement this week given that both CPI inflation and the pace of economic growth is falling."
Instead, said Bishop, there have been growing arguments for a rate cut, a move that would shift the rhetoric of the monetary policy committee into dovish territory.
'Over-optimistic'
But such an expectation is "vastly over-optimistic", according to Japanese investment bank Nomura emerging markets economist Peter Attard Montalto.
"We think we should ignore the fact that the rand-US dollar exchange rate has come off its recent highest point since August and focus instead on the fact that it is actually some 4.2% higher than at the last meeting on 19 September," said Attard Montalto on Tuesday.
Indeed, this is likely to be the weakest the rand has been against the US dollar at a rate meeting since February 2009, and it's an even starker story in nominal and real terms.
Equally, while CPI inflation has indeed fallen sharply from the August peak of 6.4%, core inflation has ticked up slightly," he said.
"The macro picture is one of a weak third quarter [which the Reserve Bank has long forecast] and CPI risks, a weak currency and vulnerability metrics remaining high," he said.
"That is, the same story continues."
Answering questions after the speech Marcus said: "The question of whether there was room to reduce rates was discussed and as we’ve indicated, the view of the committee is that we don’t see that that room exists.” ?