SA Reserve Bank announces steep increase in repo rate

The South African Reserve Bank on Thursday raised the repo rate by 50 basis points, the steepest increase by the bank’s monetary policy committee (MPC) since 2016.

The increase takes the central bank’s key rate to 4.75% and the prime lending rate of commercial banks to 8.25%. In March, the central bank hiked its benchmark repo rate by another 25 basis points to 4.25%, a third consecutive increase due to rising inflation risks stemming from the war in Ukraine.

“Four members of the MPC agreed to the 50 basis points increment, whereas one preferred 25 basis points,” said Reserve Bank governor Lesetja Kganyago, noting that the decision to hike rates resulted from both global and domestic factors.

Global financial conditions are expected to tighten further, resulting in a weaker rand-dollar exchange rate. “Food prices will stay high and fuel prices are set to see a decline in 2023,” added Kganyago.

Economists had predicted during the week that the central bank would most likely increase rates.

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