Repo rate rises to 5.5%


The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) has decided to increase the repurchase rate repo rate by 75 basis points.

The increase means the repo rate would be 5.50% per year from the 22 July 2022.

The MPC made the decision during its meeting on Wednesday. This was the fourth consecutive increment following a two 25 basis points hike in November and in January. The repo rate was hiked by 50 basis points at the May meeting.

At that time, the rise was the first in almost three years following a series of repo rate cuts amid the COVID-19 pandemic.

Addressing the media on Thursday, SARB Governor Lesetja Kganyago said three members of the Committee preferred the announced increase.

“One member preferred a 100 basis points increase. Another member preferred a 50 basis point increase,” he said.

Kganyago said achieving “a prudent public debt level, increasing the supply of energy, moderating administered price inflation and keeping wage growth in line with productivity gains would enhance the effectiveness of monetary policy and its transmission to the broader economy”.

He said economic and financial conditions were expected to remain more volatile for the foreseeable future.

“In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook. 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. The Bank will continue to closely monitor funding markets for stress,” he said.

A higher global oil price and rand weakness contributed to higher expected fuel price inflation for this year at 38.9% (up from 31.2%) and to 4.5% in 2023 (up from -0.3%). Local electricity price inflation is unchanged at 11.0% in 2022, 9.2% in 2023, and 10% in 2024