) from growth in 2024, compared to 1. 5 percentage points in 2023. page 4 of 11 as with the global trend of moderating inflation, south africa ’ s headline inflation decelerated over the past year, falling from 6. 9 % in 2022 to average 6 % in 2023. these annual averages, however, hide the ongoing volatility in the underlying components of inflation, in turn demonstrating the risks and uncertainty marking the disinflation path. since september of last year, headline inflation has been fluctuating between 5 % and 6 %, with frequent monthly setbacks coming from fuel, food and services prices. 7 in february, core inflation rose by 0. 4 percentage points to 5 %, propelled sharply higher by medical insurance inflation. encouragingly, as of june, core inflation has moved to 4. 5 %. the sarb sees core inflation averaging 4. 6 % this year, from 4. 8 % last year. inflation expectations eased in the first half of this year, but still remain well above the midpoint of the target band. while headline inflation came out between 5 % and 6 % for much of the past year, our current forecast shows it easing to 4. 9 % this year, pulled lower mainly by softening food and fuel inflation, and resting at the midpoint in 2025 and 2026. even with some quantitative and qualitative adjustments to risk perceptions over time, the monetary policy committee ( mpc ) has felt it appropriate to maintain the repurchase ( repo ) rate at 8. 25 % – a level set in may of 2023. financial stability turning to financial stability, the sarb continued to ensure that the financial system remains resilient, without any systemic threats to its functioning materialising during the 2023 / 24 financial year. this is despite the risks to the outlook that include sustained geopolitical tensions, sticky inflation and government debt levels that remain uncomfortably elevated, globally. these risks have coincided with an unprecedented number of national elections around the world, leading to some uncertainty and heightened market volatility. 7 inflation moderated to 5. 1 % in december 2023, from 5. 9 % in october, before accelerating to 5. 6 % in february 2024. headline inflation has moderated from february and remained unchanged at 5. 2 % in both april and may. page 5 of 11 south africa is still confronted with its government ’ s growing debt levels and everhigher

, is likely to be temporary in nature. the third transmission channel of unconventional monetary policy has been through the increase in asset values, both through the liquidity effect and by lowering the rates used to discount future streams of earnings. this has occurred both in advanced, as well as in emerging market economies. since the us fed embarked on the first round of quantitative easing, the us equity market, as measured by the s & p500, has gained over 232 per cent. the equity market in south africa gained 236 per cent over the same period in rand terms. however, even though foreign equity flows slowed somewhat since the taper tantrum in may 2013 and the actual tapering commencing in january 2014, the jse has continued rising and equity valuations at about 17, 3 times forward price - earnings ratio are firmly above their longterm trend. while south africa has experienced significant volatility in its exchange rate, as well as a surge in asset prices, there is little evidence to suggest that this has had a significant impact on the domestic credit cycle. the credit - to - gdp gap, which was in line with the positive levels of the credit - to - gdp gap of most advanced economies during the build - up phase of the global financial crisis, is currently below its long - term trend in south africa. recently, christine lagarde, the md of the imf, argued that even if the process of interestrate increases by the us fed is well - managed, it may result in excessive volatility in financial markets and trigger a reversal of capital flows, particularly from vulnerable emerging market economies as investors reassess their perception of risk. south africa, with its large budgetand current - account deficits, remains vulnerable to capital outflows and a weakening of the currency. bis central bankers ’ speeches the impact of low oil prices on the global economy the similarities between the transmission mechanism of the 2006 fall in us house prices and the fall in the price of oil since june 2014 have prompted some analysts to predict that the correction in the oil price could ultimately lead to negative spill - over effects to the global economy. the us shale gas and oil industry is highly leveraged, and capitalised on the rise in the price of oil that started almost a decade ago. banks ’ lending to the energy sector of billions of dollars could pose a systemic risk to the global financial system. the exposure was seen as low - risk and the pricing of risk by lenders might have been less robust