South Africa’s central bank delivered another jumbo interest-rate increase, prolonging its most aggressive monetary policy tightening cycle in at least two decades as it tries to tame inflation.
The monetary policy committee raised the benchmark rate to 7% from 6.25%, Governor Lesetja Kganyago said Thursday. The move matched the median expectation of economists in two separate Bloomberg surveys.
The key rate is now at a level last seen in South Africa more than five years ago when the MPC was trying to guide consumer-price growth back below the 6% ceiling of its target band. It now matches the panel’s so-called steady state repurchase rate, which was published for the first time Thursday.
“We will still see increases in the repo rate going forward, but these will likely be at a slower pace. I am expecting a couple more smaller rate rises, of 50bps and 25bps, at the first two meetings of 2023, and then hoping we will be at the top of the rate hike cycle — although not expecting rates to come down anytime in 2023.” Angelika Goliger, chief economist at EY Africa.
Headline and core inflation, which excludes the prices of food, non-alcoholic drinks, fuel and electricity, quickened in October, prompting the central bank to raise average forecasts through 2023.
The central bank now sees headline and core-price growth returning close to the target midpoint in 2024.
Read also; South Africa Central Bank Raises Key Interest Rate by 75 bps to 6.25%.
