SA Reserve Bank increases repo rate by 50 basis points to 4.75%

Governor Lesetja Kganyago made the announcement on Thursday afternoon.

FILE: South African Reserve Bank Governor Lesetja Kganyago. Picture: @SAReserveBank/Twitter

JOHANNESBURG - The South African Reserve Bank has increased the repo rate by 50 basis points to 4.75% per year, with effect from the 20 May 2022.

Governor Lesetja Kganyago made the announcement on Thursday afternoon.

He said there was consensus within the monetary policy committee to raise the rate by 50 basis points.

“The rand has since depreciated strongly from April due to the start of policy normalisation in major economies and the slowdown in China’s economy."

The governor said there were concerns about risks to the inflation outlook.

“Average surveyed expectations of future inflation have increased to 5.1% for 2022. Expectations for inflation based on market surveys have increased to 5.9%.”

Kganyago said inflation was heading beyond its target of between 3% to 6% and was now at the upper end of its target range.

“The bank’s forecast of headline inflation for this year is revised higher to 5.9% [from 5.8%], primarily due to the higher food and fuel prices.”

He said there were a number of factors driving inflation including electricity and oil prices driven by what was happening in Ukraine.

“Russia’s war in the Ukraine is likely to persist for the rest of this year and may have significant further effects on global prices. Oil prices increased strongly from the start of the war and may rise more as stresses in energy markets intensify. Electricity and other administered prices continue to present short- and medium-term risks. Higher diesel and coal prices may result in upward revisions to our electricity price forecast for 2023. Given below-inflation assumptions for public sector wage growth and higher petrol and food price inflation, considerable risk attaches to a still moderate nominal wage forecast.”

The governor said the MPC would continue to monitor inflation and act further if needed.