Johannesburg – The South African Reserve Bank on Thursday afternoon raised the “repo rate” by 25 basis points with effect from Friday.
“The MPC [Monetary Policy Committee] decided to increase the repurchase rate by 25 basis points to 7.25% per year, with effect from the 27th of January 2023,” said Lesetja Kganyago, Governor of the South African Reserve Bank.
He said three members of the Committee preferred the announced increase. Two members preferred a 50 basis points increase.
“The revised repurchase 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,” said the governor.
“The aim of policy is to anchor inflation expectations more firmly around the mid-point of the target band and to increase confidence of attaining the inflation target sustainably over time.
“Guiding inflation back towards the mid-point of the target band can reduce the economic costs of high inflation and enable lower interest rates in the future.”
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.
“Economic and financial conditions are expected to remain more volatile for the foreseeable future,” said Kganyago.
“In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook.”
He said 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,” said Kganyago.
