SARB increases the repo rate by 50 basis points
Reserve Bank Governor Lesetja Kganyago announced a 50 basis points (bps) hike in the repo rate following the bank’s May Monetary Policy Committee (MPC) meeting on Thursday.
The governor cited rising global inflation for the decision, bringing the bank’s key rate to 4.75% and the commercial bank’s main lending rate to 8.25%.
The repo rate was previously 4.25%, while the primary loan was 7.75%.
“Investors’ appetite for riskier assets is weaker and the value of assets in major markets has declined,” Kganyago said.
“Economies that have not harnessed the best global conditions or reduced large macroeconomic imbalances remain vulnerable to currency depreciation,” he said.
The Reserve Bank governor said South Africa’s economy was recovering from the pandemic last year, expanding by 4.9%.
The economy was expected to grow 2% this year, but that projection was revised down to 1.7% at the time of the March meeting.
This is due to a combination of short-term factors such as KZN floods and ongoing electricity supply constraints.
Kganyago said the worsening economic recovery in both developing and developed markets remained slow and vulnerable.