More pain for South Africans as repo rate returns to pre-Covid levels

South Africa Reserve Bank Governor, Lesetja Kganyago, has announced that the repo rate will increase by 75-basis points. The repo rate is now 6.25%.

This is the fifth repo rate increase since the it hit its lowest level during the Covid-19 pandemic. It was last hiked in July this year to 5.50%.

Delivering the Monetary Policy Committee’s decision on Thursday, Kganyago said that three members were in favour of 75 basis points increase, while two were in favour of a 100 basis points hike.

The level of the repurchase rate is now closer to that before the start of the pandemic.

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The revised repurchase rate path remains supportive of credit demand in the near term, while raising rates to levels more consistent with the current view of inflation risks.

The aim of policy is to anchor inflation expectations more firmly around the mid-point of the target band and to increase confidence of hitting the inflation target in 2024.

Kganyago said the Reserve Bank’s forecast for global growth in 2022 is revised down from 3.3% in the July meeting to 3.0%, and lowered to 2.0% (from 2.5%) for 2023.

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