THE South African Reserve Bank’s monetary policy committee has increased the repo rate by another 25 basis points to 4.25%.
This brings the prime rate to 7.75%.
The 25-basis point increase was widely expected by most economists and market commentators.
Following the conclusion of the bank’s March Monetary Policy Committee (MPC), the committee opted not to go for an even higher repo rate hike, despite pressure from spiralling oil prices in the wake of the Russia-Ukraine conflict
“We expect oil prices to average US$103 for 2022, $80 in 2023, $75 in 2024,” said South African Reserve Bank Governor Lesetja Kganyago.
“Economic growth at these rates remains well above a low rate of potential growth still constrained by load-shedding and policy uncertainty. Investment by the government sector has weakened significantly in recent years and that of public corporations is forecast to be very modest. Household spending remains supportive, as a result of good growth in disposable income, rising asset prices, and low interest rates, while private investment has also proved to be more resilient than previously expected.”
The MPC will seek to look through temporary price shocks and focus on potential second-round effects and the risks of de-anchoring inflation expectations, Kganyago said.
“Better anchored expectations of future inflation could support lower interest rates and can be realised by achieving a prudent public debt level, increasing the supply of energy, moderating administered price inflation and keeping wage growth in line with productivity gains. Such steps will enhance the effectiveness of monetary policy and its transmission to the broader economy,” he said.
The MPC expects the economy would grow by 2% in 2022, compared to its prediction of 1.7% in January and by 1.9% in 2023 and 2024, from 1.8% and 2%, respectively, previously.
The bank said the outbreak of war between Russia and Ukraine is expected to reduce global economic growth and contribute to higher inflation.
The bank forecast for global growth in 2022 is revised down to 3.7%.
- Inside Politics
