Sarb ups repo rate to 7.25%

As widely expected, South African Reserve Bank (Sarb) Governor Lesetja Kganyago announced a 25 basis-point hike in its benchmark repo rate on Wednesday.

This is the second increase this year, taking the rate to 7.25%, while the prime interest rate of commercial banks will increase to 10.75%.

It was a case of the Sarb’s Monetary Policy Committee (MPC) having little choice in the face of rising inflationary pressure from volatile oil prices amid the ongoing Middle East conflict.

Earlier on Wednesday, Stats SA reported that the Consumer Price Inflation (CPI) rate had increased to 4.4% in August, from 4.3% in July.

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Read: Inflation picks up slightly ahead of rate decision

While this CPI increase was lower than expected, the latest reading is now 140 basis points above the Sarb’s new key inflation target of 3%.

“We see upside risks to inflation,” Kganyago said in his September MPC speech.

“Against this backdrop, the committee decided to raise the policy rate by 25 basis points, to 7.25%, effective from 25 September. The decision was unanimous,” Kganyago added.

“A few months back, it seemed that the fuel-price shock might be unwinding, but now it has intensified. We are also seeing global rates moving higher,” he noted.

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“We have taken a measured approach to rate setting, in conditions of high uncertainty, but we remain focused on our price-stability mandate. It is crucial that inflation reverts to 3% as the current shock fades, and we take responsibility for delivering that outcome,” he said.

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