South Africans are set to feel more pain in the coming months as the South African Reserve Bank (SARB) today hiked the repo rate once again by 25 basis points, taking the repurchase rate (repo rate) to 7.25% from 7%.
This means that the prime lending rate in the country will increase from 10.5% to 10.75%.
SARB Governor Lesetja Kganyago said that the changes will come in to effect from 27 January 2023.
Many economists ahead of the Monetary Policy Committee’s (MPC) meeting predicted a hike of between 25 - 50 basis points.
The MPC decided to increase the repurchase rate by 25 basis points to 7.25% per year, with effect from the 27th January 2023. #SARBMPCJAN23 pic.twitter.com/bQv8NyR5Kc
The graphic below shows how much your home loan repayment will increase per month:
Watch the governor make the announcement below:
Predicted
“As this year commences, high inflation & weak economic growth continue to shape global conditions. Russia’s war in the Ukraine drags on & recession risks remain elevated in the Euro Area, even though energy constraints have eased,” Kganyago said during his briefing.
The governor said that the bank now expects the South African GDP to grow by just 0.3%, due to load shedding and other factors.
For 2023, and as a result of extensive load-shedding and other logistical constraints, the Bank now forecasts GDP growth of only 0.3%. #SARBMPCJAN2023 pic.twitter.com/Q8KdTojTTU
— SA Reserve Bank (@SAReserveBank) January 26, 2023
Inflation forecast remains the same
“The Bank’s forecast of headline inflation for 2023 is unchanged at 5.4% and is slightly higher at 4.8% for 2024. In 2025 we still expect headline inflation of 4.5%. Our forecast for core inflation is somewhat lower at 5.2% in 2023 (down from 5.5%) and 4.7% in 2024 (down from 4.8%),” Kganyago said.
Food inflation may soon soar due to power cuts
The governor warned that consumers may see food prices increasing in 2023.
“Domestic food price inflation continues to surprise higher. Load-shedding may have broader price effects on the cost of doing business and the cost of living,” he said.
“Achieving a prudent public debt level, increasing the supply of energy, moderating administered price inflation and keeping wage growth in line with productivity gains would enhance the effectiveness of monetary policy and its transmission to the broader economy. 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,” Kganyago said.
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