Repo Rate Increases to 4.25%

The repo rate is the rate at which the South African Reserve Bank lends money to commercial banks in South Africa. The rate is set by the Reserves Bank's Monetary Policy Committee and is adjusted for the purpose of keeping inflation below the target limit.

The South African Reserve Bank (SARB) has increased the repo rate to 4.25%, bank governor Lesetja Kganyago announced on Thursday, after raising the rate by 25 basis points effective 25 March 2022.

This meant that the prime lending rate of commercial banks increased to 7.75%.

Inflation was high due to a number of factors, including high electricity prices: "The banks' forecast of headline inflation for this year is revised higher to 5.8% primarily due to the higher food and fuel prices.", said Lesetja.

Highlights

• The South African economy is expected to grow 2% in 2022, an upward revision from the 1.7% cited in the January meeting - it was revised up due to stronger growth in 2021 and higher commodity export prices.
• GDP growth is forecast to be 1.9% in both 2023 and in 2024.
• "Household spending remains supportive, while private investment has also proved to be more resilient than previously expected.
• Core inflation is forecast to increase to 4.2% in 2022 (up from 3.8%), to 5% in 2023 (from 4.4%), before easing somewhat to 4.7% in 2024 (from 4.5%).
• The outbreak of war between Russia and Ukraine is expected to reduce global economic growth and contribute to higher inflation.
• The SARB forecast for global growth in 2022 is revised down to 3.7%
• The SARB expects oil prices to average US$103 for 2022, $80 in 2023, $75 in 2024.