Governor of the South African Reserve Bank, Lesetja Kganyago, confirmed on Thursday, 30 March 2023, that the repo rate would be hiked by 50 basis points, with effect from 31 March 2023.
This brings the rate to 7.75%. Earlier this year in January, the repo rate was hiked by 25 basis points to 7.25%. The prime lending rate, which is the rate at which banks lend money to consumers, increases to 11.25%.
This is the highest it has been since 2009, shortly after the 2008 financial collapse.
According to Kganyago, three members of the Monetary Policy Committee voted in favour of a 50 basis points increase while two members voted in favour of a 25 basis points increase.
The repo rate is the rate at which the central lends money to commercial banks.
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No easing of difficult conditions
The governor said that South Africans were entering the second quarter of 2023, with sticky inflation, sluggish growth and now elevated financial stability risks which mark the global economy.
“Despite somewhat better growth outcomes in the first months of the year, we see no material easing of difficult global economic conditions,” he said.
He said that the bank’s forecast for GDP growth was lowered to 0.2% from the 0.3% that they initially expected in January.
More pain ahead?
He said that the rise in South Africa’s headline inflation rate has been shaped primarily by fuel, electricity and food price inflation.
The governor concluded that economic and financial conditions are expected to remain more volatile for the foreseeable future.
“In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook,” he said.
