SA Reserve Bank raises repo rate by 50 basis points to 4.75%

SA Reserve Bank raises repo rate by 50 basis points to 4.75%

Governor Lesetja Kganyago made the announcement on Thursday afternoon.

FILE: South African Reserve Bank Governor Lesetja Kganyago. Photo: @SAReserveBank/Twitter

JOHANNESBURG – The South African Reserve Bank has raised the repo rate by 50 basis points to 4.75% per annum, effective May 20, 2022.

Governor Lesetja Kganyago made the announcement on Thursday afternoon.

He said there was a consensus in the monetary policy committee to raise the rate by 50 basis points.

“The rand has since depreciated sharply from April due to the start of policy normalization in major economies and a slowing Chinese economy.”

The governor said there were concerns about risks to the inflation outlook.

“Average surveyed future inflation expectations rose to 5.1% for 2022. Inflation expectations based on market research rose to 5.9%.”

Kganyago said inflation was heading past its target of 3% to 6% and was now at the upper end of its target range.

“The bank’s headline inflation forecast for this year is revised up to 5.9% [from 5.8%]mainly due to rising food and fuel prices.

He said there were a number of factors driving the inflation, including electricity and oil prices driven by what was happening in Ukraine.

“Russia’s war in Ukraine is likely to persist for the rest of this year and could have other significant effects on world prices. Oil prices have risen sharply since the start of the war and could rise further as tensions in energy markets escalate. Electricity and other administered prices continue to pose risks in the short to medium term. Rising diesel and coal prices could lead to upward revisions to our electricity price forecast for 2023. Given the below-inflation assumptions for public sector wage growth and rising In fuel and food prices, there is considerable risk attached to still moderate nominal wage forecasts.

The governor said the MPC would continue to monitor inflation and take more action if needed.

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