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BL Premium reports that the SA Reserve Bank’s (SARB’s) monetary policy committee (MPC) on Thursday raised rates by 25 basis points to 3.75%. It was the first increase in three years, and is said to mark the beginning of a gradual normalisation of policy following the Covid-19 outbreak and lockdowns.
The decision was a divided one, with three MPC members voting for an increase and two for rates to be kept on hold. The decision came despite the Bank making only small adjustments to its inflation outlook and saying GDP growth would average 1.8% from 2022 to 2024. However, it highlighted additional upside risks to its inflation outlook, including a weakening currency and escalating wage demands, even as it softened its growth expectations. Governor Lesetja Kganyago said even after the change, the Bank’s stance remained accommodative. Policy rates had been kept at a five-decade low of 3.5% since July 2020, in a bid to support businesses and households through one of the worst economic recessions in memory. Since its May meeting, the MPC has been highlighting the upside risks to inflation. For this year and the next two years, the Bank revised its headline consumer price inflation forecast slightly higher to 4.5% for 2021 (from 4.4%), to 4.3% in 2022 (from 4.2%) and to 4.6% in 2023 (from 4.5%). Headline CPI for 2024 is expected to be 4.5%. Over and above its rate revisions, the Bank “still continues to warn of even more upside pressures to inflation”, and this likely drove the decision to hike, Reezwana Sumad of Nedbank commented.
- Read the full original of the report in the above regard by Lynley Donnelly at BusinessLive (subscriber access only)
- Read too, Fuel inflation the biggest risk in Sarb’s repo rate decision, at Moneyweb
Get other news reports at the SA Labour News home page