[ALERT] Reserve Bank raises repo rate 25 basis points to 6.75%

The repo rate has been at 6.5% since March this year when it was cut by 25 basis points.

FILE: Reserve Bank Governor Lesetja Kganyago. Picture: GCIS.

PRETORIA - South African Reserve Bank (Sarb) Governor Lesetja Kganyago has announced that the repo rate will increase by 25 basis points to 6.75% per annum.

The repo rate has been at 6.5% since March this year when it was cut by 25 basis points.

South Africans have been hit hard by increased fuel prices and a rising cost of living, but economists agree there are a few signs that the worst may be over.

Kganyago warned following the monetary policy committee's last meeting of the possibility of rising inflation due to increased fuel prices.

However, the Automobile Association has predicted that the country will see substantial price decreases next month, providing relief to consumers and helping to bring down the cost of living.

Added to this, inflation for October rose only slightly to 5.1%, just below market expectations. This was from 4.9% the month before and is still within the Reserve Bank's target of 3 to 6%.

Kganyago says inflation is a major concern and the Reserve Bank would rather take action now.

“Monetary policy actions will continue to focus on anchoring inflation expectations near the mid-point of the inflation target range in the interest of balanced and sustainable growth.”

He says the bank decided to take action now due to concerns over inflation, which hit 5.1% last month.

“The MPC noted the rising inflation trajectory which, while remaining within the target range, continues to deviate from the mid-point of the target range.”

Kganyago says it was a difficult decision as the MPC was divided.

“Three members preferred an increase and three members preferred an unchanged stance.”

He says the US and countries in Europe are also set to increase their rates over the next year.

“This means that monetary policies in some advanced economies will likely be tightening throughout the forecast period.”