South African Reserve Bank Interest Rate Hiked 50 Basis Points after 4-1 Vote

May 19, 2022

With one dissent favoring a 25-basis point increment, South Africa’s Monetary Policy Committee agreed to increase its interest rate to 4.75%. This new level is 125 basis points above the pandemic low of 3.5% prevailing from July 2020 until November 2021 but 175 basis points below the pre-pandemic level of 6.5%. A released statement lays out a path of additional normalizing interest rate hikes that that will swing the inflation-adjusted level from -1.5% last year to +2.0% in late 2024 by which time South African inflation of 5.9% now should be mostly realigned with the center of the central bank’s 3-6% target corridor. Officials concede that inflation forecast risks are skewed to the upside and that measures of expected inflation have drifted higher. Economic growth is projected to grow only 1.7% this year and 1.9% in both 2023 and 2024, and one of the growth depressants will be the war between Russia and Ukraine, which MPC officials assume is likely to continue at least through the end of this year.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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