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The South African Reserve Bank (Sarb) lifted the repo rate by 25 basis points on Thursday to 7.25%.
The raise is the eighth since the central bank began its hiking cycle at the end of 2021 when it adopted a combative stance to tame spiraling inflation.
The interest rate decision delivered by Reserve Bank Governor Lesetja Kganyago at the first meeting of 2023, brings South Africa’s prime lending rate to 10.75%.
The 25bps increase follows the consecutive jumbo hikes of 75 basis points each, which signals the Reserve Bank may be at the end of its hiking spell.
Of the 5 members of the Reserve Bank’s Monetary Policy Members, X voted for a raise, while xx preferred a (hold/cut).
Before the rate announcement, economists had already predicted the Sarb would hike again, but had been split on whether it would be a 25 basis points or 50 basis points increase.
The increase in the repo rates come despite December’s surprise inflation numbers, which showed a slight cooling off to 7.2%. South Africa is also contending with the worst power outages since load shedding was first implanted 15 years ago, a concern the Sarb has flagged as a risk to the country’s financial stability.
Highlights:
- GDP growth for 2023 now forecast at only 0.3% due to load shedding and other constraints. It’s forecast at 0.7% in 2024, and 1% in 2025. A material reduction in load shedding could significantly raise growth.
-2.7% fuel price inflation - Headline inflation for 2023 is unchanged at 5.4% and is slightly higher at 4.8% for 2024. In 2025 we still expect headline inflation of 4.5%.
- Forecast for core inflation is somewhat lower at 5.2% in 2023 (down from 5.5%) and 4.7% in 2024 (down from 4.8%).
- Food price inflation 9.2% in 2022, slow 7.3% in 2023, 4.4% in 2024
Domestic food price inflation continues to surprise higher. Load-shedding may have broader price effects on the cost of doing business and the cost of living. #SARBMPCJAN2023 pic.twitter.com/pEMZXDINla
— SA Reserve Bank (@SAReserveBank) January 26, 2023
For 2023, and as a result of extensive load-shedding and other logistical constraints, the Bank now forecasts GDP growth of only 0.3%. #SARBMPCJAN2023 pic.twitter.com/Q8KdTojTTU
— SA Reserve Bank (@SAReserveBank) January 26, 2023
Read: Sarb ratchets repo rate by another 75bps (Nov 2022)
Listen: How 2022’s repo rate hikes impacted homeowners
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