On Thursday, May 25, 2017, on Thursday, May 25, 2017, the head of the Central Bank of South Africa Lesseta Kganyaga will speak.
Wald Swigers Bloomberg | Getty Images
The Central Bank of South Africa on Thursday raised its key lending rate to the highest margin in more than six years as it stepped up efforts to fight inflation by raising the rand.
The decision was in line with a Reuters poll published last week.
The Monetary Policy Committee of the South African Reserve Bank (SARB) increased the repo rate by 50 basis points to 4.75%. The committee was divided 4-1, four members opted for an increase of 50 bps, and one preferred 25 bps.
The rand reached a two-week high against the dollar after the decision was announced.
“Core inflation has risen well above the average point of the inflation target range and is projected to go beyond the target range in the second quarter,” Governor Leseta Kganyag told a news conference.
He said headline inflation is expected to return closer to the middle of the fourth quarter of 2024, later than projected at the March policy meeting.
The decision, made on Thursday, marks the fourth consecutive time that SARB has raised rates, with three previous moves of 25 bp.
Earlier this year, SARB sought to emphasize that its political trajectory would be gradual to combat inflation risks, and to continue to support households and companies after the COVID-19 pandemic.
But since then higher-than-expected global inflation has pushed major central banks to accelerate the path to normalization by tightening global financial conditions.
“The market was valued at 50 bp, and the SARB delivered – in compliance with its anti-inflation recommendations,” said Raziya Khan, chief economist for Africa and the Middle East Standard Chartered. “Rand liked this tightening, which means that for SARB it came pretty instantly.”
Earlier this month, the US Federal Reserve raised rates by 50 bp. and signaled similar steps at future political meetings.
Now the SARB forecasts headline inflation this year at 5.9% from 5.8% in March. In 2022, it predicts economic growth of 1.7% against 2.0% previously forecast.
In April and March, consumer inflation was 5.9% year on year, which was near the top of the central bank’s target range of 3% -6% due to rising prices for fuel and food related to the war in Ukraine.