THE South African Reserve Bank (SARB) governor Lesetja Kganyago on Thursday announced 25 basis points increase in the repo rate, taking the key rate that it lends to commercial banks to 4%.
Addressing the media following the MPC’s meeting, Kganyago said in the near term, headline inflation had increased well above the mid-point of the inflation target band, and returns close to the mid-point in the fourth quarter of 2022.
Four members of the Committee preferred an increase and one member preferred an unchanged stance.
He said: “Some risks to the inflation outlook, like food and fuel, have been realised, and other risks, such as currency volatility and capital flow reversals, have become more pronounced. He said this year and next, economic growth would remain well above a low rate of potential growth.
The bank has also warned that the higher food, fuel and energy prices will keep inflation at elevated levels.
Kganyago said that the current rate hike comes against a backdrop of higher global and local inflation.
“The implied policy rate path of the Quarterly Projection Model (QPM) indicates gradual normalisation in the first quarter of 2022, and into 2023 and 2024, given the inflation forecast. As usual, the repo rate projection from the QPM remains a broad policy guide, changing from meeting to meeting in response to new data and risks,” he said.
GDP is expected to grow by 1.7% in 2022.
The deceleration in growth from 2021 to 2022 is primarily a result of the fading rebound from the pandemic, alongside a climb down from high export prices. GDP growth is forecast to be 1.8% in 2023 and 2.0% in 2024, Kganyago said.
“The risks to the inflation outlook are assessed to the upside. Global producer price and food price inflation continued to surprise higher in recent months and could do so again. Oil prices increased strongly through 2021 and are up sharply year to date,” he added.
“Current oil prices sit well above forecasted levels for this year. Electricity and other administered prices continue to present short- and medium-term risks.”
- Inside Politics
