Reserve Bank governor Lesetja Kganyago has announced the repo rate will be increased by 75 basis points. One member of the Monetary Policy Committee wanted a 100 basis point increase. Another member preferred a 50 basis point increase.

This latest increase will push the interest rate to 9%.

The decision to hike rates this aggressively comes on the back of the highest inflation in 13 years, surging to 7.4% in June 2022. This is the biggest increase in the repo rate since September 2002.

Kganyago says food and fuel inflation will remain elevated for the coming months.

Russia’s war in Ukraine, which is likely to persist for the rest of this year and may have significant further effects on global prices.

Analysts expect rates will continue to be increased until 2023, until the repo rate reaches the 6% of 6.25% mark – this is what it was at the end of 2019, before the Covid-19 pandemic.

The latest increase is the 5th time in a row that rates have been increased. The Reserve Bank has now increased the repo rate by 2 percentage points since November 2021.

  • Last year saw the South African economy expand by 4.9%. This year the economy is expected to grow by 2.0%, revised up from 1.7%.
  • A higher global oil price and rand weakness contribute to higher expected fuel price inflation for this year at 38.9% (up from 31.2%) and to 4.5% in 2023 (up from -0.3%).
  • As a result of higher global food prices, local food price inflation is also revised up and is now expected to be 7.4% in 2022 (up from 6.6%), and 6.2% in 2023 (up from 5.6%).
  • The Bank’s forecast of headline inflation for this year is revised higher to 6.5% (from 5.9%).