Reserve Bank hikes repo rate to 6%

South Africa’s central bank raised its benchmark interest rate for the first time in a year, following through with warnings to tighten monetary policy as inflation threatens to exceed the bank’s target.

The repurchase rate was increased by 25 basis points to 6%, Governor Lesetja Kganyago told reporters on Thursday in Pretoria. This was in line with the forecasts of 17 of the 31 economists surveyed by Bloomberg. The rest expected no change.

The Reserve Bank kept borrowing costs unchanged since July last year to help support an economy hit by strikes, power shortages and falling global metal prices. 

While inflation has stayed within the 3% to 6% target since September, a weaker rand and rising electricity costs threaten to push it outside of that band.

The central bank wants to “ensure that inflation expectations remain firmly anchored”, Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities, said in an e-mail to clients before the decision.


African central banks are bucking a global trend by raising interest rates to ward off inflation risks stemming from weaker currencies put under pressure by a slump in the commodities that make up the bulk of their exports. Uganda, Namibia, Angola, Kenya and Ghana have all tightened monetary policy this year.

Speculation that the United States Federal Reserve may increase interest rates this year has curbed appetite for emerging-market assets, contributing to the rand’s 7% slump against the dollar this year. That is adding to import costs, including gasoline prices.

An energy crisis is clouding the outlook for economic growth and inflation. Eskom Holdings is implementing regular rolling blackouts because it can’t meet power demand, hurting retailers and manufacturers. The state-owned utility is seeking to raise tariffs, even though its request for a 25% increase was denied last month.

Africa’s second-largest economy expanded by 1.5% last year, the slowest growth since the 2009 recession.– Bloomberg

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Rene Vollgraaff
Guest Author

Related stories

South Africa gets $4.3bn IMF loan. In return, the country must reform

The loan, which is repayable over five years at an interest rate of 1.1%, comes with various self-imposed conditions such cutting the public wage bill and rationalising support to the state-owned entities

Repo rate falls to 3.5% — its lowest since 1998

Repo rate drops to 3.5% as Reserve Bank predicts a 7.3% contraction in South Africa’s GDP

‘Don’t be afraid of fresh ideas’

The finance minister has found money for the Covid crisis, but the cupboard is bare and he warns that a fiscal crisis is possible in 2024

SA’s economy expected to contract by 7.2% in 2020

The economy is in a depressed state, and Finance Minister Tito Mboweni has called for cautious use of the country’s finances to avert plunging into a sovereign debt crisis

Small firms adapt or die in lockdown

The harmful economic effect of the pandemic has seen small businesses lose out, but others have been able to survive by changing to suit the times

Reserve Bank cuts repo rate by 50 basis points

The Monetary Policy Committee has cut the repurchase rate by a further 50 basis points, after a two consecutive cuts of 100 basis points earlier this year
Advertising

The PPE scandal that the Treasury hasn’t touched

Many government officials have been talking tough about dealing with rampant corruption in PPE procurement but the majority won't even release names of who has benefited from the R10-billion spend

ANC still at odds over how to tackle leaders facing...

The ANC’s top six has been mandated to work closely with its integrity committee to tackle claims of corruption against senior party members
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday