Reserve Bank hikes repo rate by 75 basis points
Updated | By Anastasi Mokgobu
The South African Reserve Bank's Monetary Policy Committee (MPC) increased the repo rate by 75 basis points on Thursday.
This pushes the repo rate, at which the central bank loans money to commercial banks, from 5.5% to 6.25%, effective from Friday.
Three members of the committee preferred a 75 basis point increase, while two members preferred a 100 basis point increase.
The increase was widely predicted by financial experts and economists as the country continues to battle stubbornly high inflation.
On Wednesday Statistics South Africa announced that consumer inflation eased slightly to 7,6% in August from a 13-year high of 7,8% in July.
Reserve Bank governor Lesetja Kganyago said their aim remains to keep inflation from spiralling out of control.
"The risks to the inflation outlook are assessed to the upside. While global producer price and food inflation has eased, Russia’s war in Ukraine continues, with adverse effects on global prices. Oil prices increased strongly from the start of the war to around US$130 per barrel, and may rise again from today’s level as stresses in energy markets intensify.
“Electricity and other administered prices continue to present clear medium-term risks. Given below-inflation assumptions for public sector wage growth and high petrol and food price inflation, the considerable risk still attaches to the forecast for average salaries.
“Higher than expected inflation has pushed major central banks to accelerate the normalisation of policy rates, tightening global financial conditions and raising the risk profiles of economies needing foreign capital," added Kganyago.
Kganyago said the increase takes the repo rate closer to pre-Covid levels.
"The revised repurchase rate path remains supportive of credit demand in the near term while raising rates to levels more consistent with the current view of inflation risks. The aim of the policy is to anchor inflation expectations more firmly around the mid-point of the target band and to increase confidence in hitting the inflation target in 2024.
“Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data-dependent and sensitive to the balance of risks to the outlook. The MPC will seek to look through temporary price shocks and focus on potential second-round effects and the risks of de-anchoring inflation expectations. The bank will continue to closely monitor funding markets for stress.”
ALSO READ
Show's Stories
-
LISTEN: Actress Sophie Joans talks about her award-winning play
Two extraordinary stage talents, Sophie Joans and Rob van Vuuren, have t...
The Drive with Rob & Roz 13 hours ago -
LISTEN: The best road trip tips ahead of the Easter weekend
From traffic to packing, Rob Forbes and Rozanne McKenzie are sharing tip...
The Drive with Rob & Roz 15 hours ago