South African Reserve Bank hikes rates

The Monetary Policy Committee (MPC) of the South African Reserve Bank has voted to hike the repo rate to 4% per annum.

Reserve Bank governor Lesetja Kganyago said in a statement on Thursday afternoon (27 January) that four members of the Committee preferred an increase and one member preferred a maintained position, adding that the rate hike comes amid increased global and local inflation.

“The implied policy rate path of the Quarterly Projection Model (QPM) indicates gradual normalisation in the first quarter of 2022, and into 2023 and 2024, given the inflation forecast. 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.

The MPC considers that a modest increase in the repo rate will be sufficient to keep inflation expectations well anchored and temper the future path of interest rates, given the forecast trajectory for headline inflation and upside risks, according to Kganyago.

However, he expects economic and financial conditions to remain turbulent for the foreseeable future.

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