The South African Reserve Bank’s (SARB) Monetary Policy Committee announced that the repurchase rate would be increased by 50 basis points (bps) with effect from Friday, 20 May.
RESERVE BANK HIKES REPO RATE
The increase is the steepest since 2016 and takes the repo rate to 4,75% and the prime lending rate for banks to 8,25%.
Sixteen out of 24 economists predicted the outcome in a recent Reuters survey, while the remaining eight believed it would be a 25 bps increase.
As it turned out, four members of the MPC were in favour of the 50 bps increase while one member preferred a 25 bps rise in the repo rate.
“Higher than expected inflation has pushed major central banks to accelerate the normalisation of global policy rates, tightening global financial conditions,” said Lesetja Kganyago, the governor of the SARB.
Kganyago further explained that the interest rate hike was made against the backdrop of a number of increases, including electricity, oil, food and fuel prices.
“Russia’s war in the Ukraine is likely to persist for the rest of this year and may have significant further effects on global prices.
“Oil prices increased strongly from the start of the war and may rise more as stresses in energy markets intensify.
“Electricity and other administered prices continue to present short- and medium-term risks. Higher diesel and coal prices may result in upward revisions to our electricity price forecast for 2023,” said the governor.
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