Sarb raises repo rate by 25 basis points to 6.25%
The reserve bank has announced that interest rates will increase to 6.25% as of 20 November.
JOHANNESBURG - South African Reserve Bank (Sarb) governor Lesetja Kganyago said on Thursday it will raise the repo rate by 25 basis points.
This means the repo rate, which is the rate at which the Sarb lends money to banks, will rise to 6.25%. The prime lending rate, the figure charged by banks to customers, will increase to 9.75%.
The announcement was made in the capital after a two-day meeting of the Sarb's Monetary Policy Committee (MPC).
This comes after rates were last lifted by 25 basis points in July on the back of inflationary concerns.
Kganyago says the bank's monetary policy committee has decided to raise interest rates by 25 basis points because they expect food and power prices to push up inflation.
The governor says they had to decide whether to act now or to act later.
"Delaying the adjustment could give the MPC room to reassess these unfolding developments and avoid possible head wings and could further lead to second round effects."
Kganyago also says they're concerned that the economy is not creating jobs.
He says it's clear that food prices are going to go up.
"The increase intensity of the drought which has led to downward revisions of the domestic maize crop estimate suggests that an acceleration in food price inflation is likely, adding to upside risk to the inflation outlook."