The South African Reserve Bank's Monetary Policy Committee has increased the repo rate by yet another 75 basis points.
The latest increase pushes the repo rate, at which the central bank loans money to commercial banks, from 6.25% to 7% effective from Friday.
Thursday’s announcement comes a day after Statistics South Africa revealed that consumer inflation picked up slightly to 7.6% in October from 7.5% in September.
Three members of the committee preferred the announced 75 basis point increase, while two members preferred a 50 basis point increase.
Reserve Bank governor Lesetja Kganyago said the policy normalisation in major economies and the slower growth in China have contributed to the depreciation of many emerging market currencies, including the rand.
"Globally, economic growth is slowing and prices have fallen for some goods and transport services. However, price pressures continue to spread from goods to services and wages. Our estimate for inflation in the G3 is revised higher to 7.3% in 2022 (from 7.0%), and 4.1% in 2023 (from 3.5%). The forecast for 2024 is unchanged at 2.1%.
"Even though South Africa’s fuel price inflation for the year remains exceedingly high, some easing of global oil prices has led to forecast revisions in the last few MPC meetings," he added.
At the same time, Kganyago warned that the economic and financial conditions are expected to remain volatile.
"The level of the repurchase rate is now above the level prevailing before the start of the pandemic. The revised repurchase rate remains supportive of credit demand in the near term while raising rates to levels more consistent with the current view of inflation and risks to it."
"The aim of the policy is to anchor inflation expectations more firmly around the mid-point of the target band and to increase confidence of attaining the inflation target sustainably over time," Kganyago said”
