THE South African Reserve Bank on Thursday raised its main repo rate to 3.75%, its first increase since taking the rate to a record low 3.5% in April 2020.
Governor Lesetja Kganyago said the bank took the decision because the risks of rising inflation have increased and its interest rate remains low. This is even though the SARB’s monetary policy committee expects annual inflation to remain close to the midpoint of its target range of 3% to 6% in the coming years.
Three members of the committee voted to increase rates, while two members preferred a hold, Mr. Kganyago said.
He said the bank’s quarterly projection model indicates further increases of 0.25% in each quarter of 2022, 2023 and 2024, while stressing that any rate hikes would be based on economic developments.
The SARB now expects the gross domestic product of Africa’s most developed economy to grow 5.2% in 2021, down slightly from a 5.3% expansion predicted in September, due in part to the bigger than foreseen impact of July’s riots, Mr. Kganyago said.
Its GDP forecast for 2022 remained unchanged at 1.7%.
“The July unrest, the pandemic and ongoing energy supply constraints are likely to have lasting effects on investor confidence and job creation, impeding recovery in labor-intensive sectors hardest hit by the lockdowns,” Mr. Kganyago said.
Rising energy and food prices have pushed up South Africa’s consumer-price inflation in recent months. Consumer price inflation was 5% in October, the sixth consecutive month in which annual inflation was higher than the midpoint of the central bank’s target range.
- MarketWatch
