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Repo rate increases by 75-basis points

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Reserve Bank Governor Lesetja Kganyago announced a 75-basis point rate hike effective from Friday.

This takes the repo rate to seven percent and the prime lending rate to 10.5 percent

Economist Goolam Ballim says that the fact that two members of the Monetary Policy Committee (MPC) were more inclined to a 50- basis point rate hike, signals a division in the MPC.

The committee based its rates decision on continued high inflation in South Africa and a weakening economic outlook.

Ballim says that the bank’s stance shows that it is likely to continue hiking rates.

“The picture articulated by the Reserve Bank is slightly worse than its previous monetary policy messaging. It’s now told us that it expects lower economic growth, over the near to medium term and slightly higher inflation with respect to the headline CPI measure. Effectively, the Reserve Bank is behaving in an orthodox manner, in the sense that it wants to break the back of inflation expectations and therefore will continue to hike rates.”

Reserve Bank’s 75 basis points rate hike decision: Goolam Ballim

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