The South African Reserve Bank (Sarb) hiked the repo rate by 50 basis points (bps) on Thursday, the steepest increase since 2016.
Spiking global inflation fuelled the move, which takes the bank’s key rate to 4,75 percent and the prime lending rate of commercial banks to 8.25 percent.
Sarb Governor Lesetja Kganyago announced the rate hike on Thursday, following the conclusion of the bank’s May Monetary Policy Committee (MPC) meeting.
He said four members of the MPC voted for a 50bps hike, while one member voted for an increase of 25bps.
The central bank’s forecast for headline inflation has been revised higher to 5.9 percent for 2022, due to higher fuel and food prices.
“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 may do so again,” said Kganyago.
“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,” he warned.
He said the bank’s GPD forecast for 2022 has been revised down to 1.7 percent, from 2 percent following the MPC meeting in March.
Kganyago listed short-term negative impacts of the KwaZulu-Natal floods in April and ongoing energy supply issues (load shedding) as contributing factors to the downward revision in the Sarb’s GDP forecast. − Moneyweb.