The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) has decided to raise the repurchase rate (repo rate) by 75 basis points.
The hike means that starting on July 22, 2022, the repo rate will be 5.50 percent annually.
The choice was reached by the MPC on Wednesday during their meeting.
In the wake of two increases of 25 basis points each in November and January, this was the fourth straight increase.
At the May meeting, the repo rate was increased by 50 basis points.
At the time, the increase was the first after a period of repo rate reductions brought on by the COVID-19 epidemic and lasting over three years.
Three Committee members favoured the announced increase, SARB Governor Lesetja Kganyago said in a statement to the media on Thursday.
“One vote was in favour of an increase of 100 basis points.”
“A 50 basis point increase was preferred by another member,” he stated.
Achieving “a conservative public debt level, expanding energy supply, reducing administered price inflation, and maintaining wage growth in line with productivity improvements will enhance the efficiency of monetary policy and its transmission to the broader economy,” according to Kganyago.
He claimed that more erratic economic and financial situations were anticipated for the foreseeable future.
“In this unsettling climate, monetary policy decisions will remain reliant on facts and sensitive to the distribution of outlook risks.
The MPC will attempt to see past transient price shocks and concentrate on potential follow-up impacts and the dangers of unanchored inflation expectations.
The Bank will keep a close eye on the funding markets for signs of stress, he added.
Higher anticipated gasoline price inflation for this year at 38.9 percent (up from 31.2 percent) and to 4.5 percent in 2023 are both results of rising global oil prices and rand depreciation (up from -0.3 percent ).
Local power price inflation is stable at 11.0 percent in 2022, 9.2 percent in 2023, and 10 percent in 2024.