Another 25-bp increase in the repo rate by the South African Reserve Bank

SOUTH AFRICA - Report 25 Mar 2022 by Iraj Abedian

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) announced yesterday that it is once again raising the benchmark interest rate by 25 basis points – its third consecutive increase. This pushes the repo rate up​ from 4% to 4.25% and the prime lending rate from 7.5% to 7.75%.

It has become an increasingly challenging environment for monetary policy decision making globally, including here in South Africa. Rising inflation rates have mostly warranted monetary policy normalization while at the same time recovery from the Covid-19-induced economic crisis is under way. Meanwhile the Ukraine-Russia war has added even more uncertainty concerning growth alongside the increased inflationary pressures on account of increased commodity prices. Nonetheless, the Reserve Bank’s policy normalization is likely to continue despite the increased headwinds on growth due to the prevailing higher inflation and increased risks to the inflation outlook.

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