Repo rate to increase to 3.75%

South African Reserve Bank Governor Lesetja Kganyago made the announcement on Thursday afternoon at a press briefing.

FILE: South African Reserve Bank Governor Lesetja Kganyago. Picture: AFP

JOHANNESBURG - South African Reserve Bank Governor Lesetja Kganyago has announced that the repo rate will increase by 25 basis points to 3.75%.

He made the announcement on Thursday afternoon at a press briefing.

Kganyago said it was a difficult decision: “Three members of the committee preferred an increase and two members preferred it unchanged.”

He said risks to inflation had increased.

“A weaker currency, higher domestic import tariffs and escalating wage demands present addition upside risk to the inflation forecast.”

The massive recent fuel price hikes had economists speculating that the bank's monetary policy committee would move to increase the rate due to higher inflation.

He said the inflation forecast had been revised up: “For this year and the next two years, headline consumer price inflation is revised slightly higher to 4.5% in 2021 to 4.3% next year.”

The governor said the rand had also lost major ground since the MPC's December meeting, losing 5.9% against the dollar.

He said this also contributed to the decision to increase the repo rate.