South African Reserve Bank Interest Rate by Most Since 2002
July 21, 2022
Facing the most CPI inflation in 13 years (7.4%), officials at the South African Reserve Bank lifted the repo rate to 5.5% from 4.75%. This was the fifth increase since November 2021 and the largest move in almost two decades. During the first year of the pandemic, the rate had been slashed by 300 basis points to 3.5%. South Africa is where the Omicron variant first appeared. The SARB targets inflation in a 3-6% range. Today’s action was not decided unanimously. There were two dissenting votes, one seeking a full percentage point increase and the other wanting to match the prior 50-basis point hike in May. The statement announcing today’s decision revises potential GDP growth downward, which has upward implications for inflation above and beyond the impulse of higher food and energy prices on world markets. Officials now look for 6.5% CPI inflation this year, 5.4% in 2023 and 4.7% in the year after that. GDP growth in 2023 and 2024 was revised lower to 1.3% and 1.6%. At 5.5%, the new repo rate is still a percentage point lower than its pre-pandemic level, but the tightening cycle is finished.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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