SA Reserve Bank Raises Repo Rate By 75 Basis Points To 7% Per Year

Johannesburg – The SA Reserve Bank (SARB) on Thursday raised the Against the repurchase rate by 75 basis points to 7% per year, with effect from Friday, (25 November 2022).

“Three members of the Committee [Monetary Policy Committee -MPC] preferred the announced increase. Two members preferred a 50 basis points increase,” the Governor of the SARB Lesetja Kganyago said.

“The level of the repurchase rate is now above the level prevailing before the start of the pandemic,” said Kganyago.

“The revised repurchase rate remains supportive of credit demand in the near term while raising rates to levels more consistent with the current view of inflation and risks to it.”

Kganyago said the policy aims to anchor inflation expectations more firmly.

He said guiding inflation back towards the mid-point of the target band can reduce the economic costs of high inflation and enable lower interest rates in the future.

The governor of the SARB said achieving a prudent public debt level, increasing the supply of energy, moderating administered price inflation, and keeping wage growth in line with productivity gains would enhance the effectiveness of monetary policy and its transmission to the broader economy.

“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,” Kganyago said.

He said the SARB’s forecast of headline inflation for this year and next is slightly higher at 6.7% and 5.4%, respectively.

“In 2024 and 2025, we expect headline inflation of 4.5%,” said Kganyago.

“Our forecast for core inflation is unchanged at 4.3% in 2022 and is higher than previously expected at 5.5% (from 5.4%) in 2023.”

He said the forecast for 2024 was unchanged at 4.8%, and 4.5% is projected for 2025.

Kganyago said 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.

He said the Bank will continue to closely monitor funding markets for stress.