The South African Reserve Bank’s Monetary Policy Committee has hiked the repo rate by 75 basis points to 7% per year, with effect from 25 November 2022.
The MPC meets every second month to assess the interest rate, having last met in September.
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This is the sixth consecutive repo rate hike that the country has seen since the start of the year.
The repo rate returned to pre-Covid levels in September this year, after it was hiked by 75 basis points to 6.25%.
South African Reserve Bank governor, Lesetja Kganyago, explained that three members of the Monetary Policy Committee preferred the 75 basis points increase, while two members preferred a 50 basis points increase.
He said that in raising the repo rate, the bank was aiming to tame the inflation monster. On Thursday, inflation increased to 7.6%.
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“The level of the repurchase rate is now above the level of prevailing before the start of the pandemic. The revised repurchased rate remains supportive of credit demand in the near term, while raising rates to levels more consistent with the current view of inflation and risks to it,” Kganyago said.
Policy normalisation has accelerated and monetary conditions are likely to tighten further to ensure inflation declines from its current high rates. With long-term borrowing costs high and fiscal positions extended, Kganyago said that there was less policy space available for major counter-cyclical efforts to increase economic growth.
The SARB’s forecast for global growth in 2023 was also revised lower to 1.9%, down from 2.0%. The International Monetary Fund’s October forecast for global growth is 3.2% in 2022 and 2.7% in 2023.