SARB hikes repo rate by another 50 basis points

The central bank hiked the repo rate by 50 basis points on Thursday, pushing the rates to its highest level since May 2009.

Governor Lesetja Kganyago made the announcement on Thursday afternoon following this week’s MPC meeting.

The Reserve Bank has hiked the repo rate by 475 basis points over the past 18 months as it attempt to keep inflation in check.

The latest increase pushes the repo rate, at which the central bank loans money to commercial banks, from 7,75%  o 8,25%.

This moves prime lending rate from 11.25% to 11,75% 

The rate announcement comes a day after Statistics South Africa data showed consumer inflation eased to an 11-month low, to 6,8% in April from 7,1% in March.

Kganyago warned that energy and logistical constraints are eating into South Africa’s growth outlook, with load shedding alone estimated to deduct 2% from GDP this year.

"Household spending is expected to grow very modestly in real terms, in line with a positive but weak rise in real disposable income. Investment by the private sector remains positive, in part reflecting efforts to overcome constraints in energy and transport supply,” Kganyago said.

“Our GDP growth forecast for 2024 and 2025 is unchanged from the previous meeting, at 1.0% and 1.1%, respectively," says Kganyago.

He added that economic growth has been volatile for some time and prospects for growth remain uncertain. 

"An improvement in logistics and a sustained reduction in load-shedding, or increased energy supply from alternative sources, would significantly raise growth. The rand’s weakness provides some short-term benefits to the tradable sector.

“Conversely, alongside more modest global growth rates and lower terms of trade, higher import prices and headline inflation create downside risks to growth. Overall, domestic and global prospects appear to be highly sensitive to new shocks.

“At present, we assess the risks to the medium-term domestic growth outlook to be balanced.”

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