For the first time in almost three years, the South African Reserve Bank’s Monetary Policy Committee (MPC) has increased the repo by 25 basis points.
The move will see the repo rate rise to 3.75% per year.
Addressing the media following the MPC’s meeting, Governor Lesetja Kganyago said the committee expects inflation to stay close to the mid-point over the forecast period, inflation risks had increased and the level of policy accommodation remained high.
“Against this backdrop, the MPC decided to increase the repurchase rate by 25 basis points to 3.75% per year, with effect from the 19th of November 2021. Three members of the committee preferred an increase and two members preferred an unchanged stance,” said Kganyago.
He said given the expected trajectory for headline inflation and upside risks, the committee believed a gradual rise in the repo rate would be sufficient to keep inflation expectations “well anchored” and moderate the future path of interest rates.
“Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook.
“The MPC will seek to look through temporary price shocks and focus on second round effects,” said Kganyago.
He said current repurchase rate levels reflect an accommodative policy stance through the forecast period, keeping financial conditions supportive of credit demand as the economy continues to recover.
The Quarterly Projection Model indicates an increase of 25 basis points in the fourth quarter of 2021 and further increases in each quarter of 2022, 2023 and 2024.
Source: South African Government News Agency