Repo rate inches up by 25 basis points

This is the first time interest rates will increase in a while after the central bank kept the repo rate steady at 3.5% for seven consecutive meetings.

While the committee expects inflation to stay close to the mid-point over the forecast period, Reserve Bank Governor Lesetja Kganyago said inflation risks have increased and the level of policy accommodation remains high.  

Three members of the MPC preferred an increase of 25 basis points, putting it at 3.75%. 

The other two members voted for rates to stay the same. 

“The implied policy rate path of the Quarterly Projection Model (QPM) indicates an increase of 25 basis points in the fourth quarter of 2021 and further increases in each quarter of 2022, 2023 and 2024,” said Kganyago.  

“As usual, the repo rate projection from the QPM remains a broad policy guide, changing from meeting to meeting in response to new data and risks.”

Kganyago added economic and financial conditions are expected to remain more volatile for the foreseeable future.  

“Given the expected trajectory for headline inflation and upside risks, the Committee believes a gradual rise in the repo rate will be sufficient to keep inflation expectations well anchored and moderate the future path of interest rates. 

“Current repurchase rate levels reflect an accommodative policy stance through the forecast period, keeping financial conditions supportive of credit demand as the economy continues to recover.”

The prime lending will inch up to 7.25%.

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