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Johannesburg, S. Africa | Xinhua | South African Reserve Bank decided to increase the repurchase rate starting Friday by 25 basis points to 3.75 percent, the first time in three years, its governor Lesetja Kganyago announced on Thursday.
Kganyago cited inflation as reason of the hiking.
“Inflation risks have increased and the level of policy accommodation remains high. Against this backdrop, the MPC (Monetary Policy Committee) decided to increase the repurchase rate by 25 basis points to 3.75 percent per year. Three members of the Committee preferred an increase and two members preferred an unchanged stance,” he said.
He further said the implied policy rate path of the Quarterly Projection Model (QPM) indicates an increase of 25 basis points in the fourth quarter of 2021 and further increases in each quarter of 2022, 2023 and 2024.
“As usual, the repo rate projection from the QPM remains a broad policy guide, changing from meeting to meeting in response to new data and risks,” he said.
Kganyago said that the July unrest, the pandemic, and the energy Eskom problems would have a lasting effect on investor confidence and the creation of jobs.
“High export prices are expected to fade, perhaps faster than previously expected. Very weak job creation will moderate household consumption. The investment will remain constrained by the high risk of further load shedding and ongoing uncertainty,” he said.
Economist at Efficient Group Dawie Roodt told Xinhua that the hiking of the repo rate was likely to happen since they had not been increased in three years.
“The decision to increase the repo rate was inevitable, it was a brave move,” he said.
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Xinhua
