JOHANNESBURG, May 19 (Xinhua -- The South African Reserve Bank (SARB) on Thursday raised the repo rate by 50 basis points, taking the repo rate to 4.75 percent a year.
SARB governor Lesetja Kganyago announced this while briefing the media about Monetary Policy Committee (MPC) decisions.
"The MPC decided to increase the repurchase rate by 50 basis points to 4.75 percent per year, with effect from May 20," he said. "As a result of higher global food prices, local food price inflation is also revised up and is now expected to be 6.6 percent in 2022, up from 6.1 percent, and 5.6 percent in 2023, up from 5.1 percent. Food price inflation is forecast to ease to 4.2 percent in 2024, down from 4.4 percent."
The central bank revised this year's headline inflation from 5.8 percent to 5.9 percent because of higher food and fuel prices.
Kganyago said food prices are expected to stay high next year, with fuel price inflation easing, helping the headline inflation to fall to 5.0 percent.
He said headline inflation is expected at 4.7 percent in 2024.
South Africa and other emerging and developing economies face higher oil, commodity and food prices constraints to trade and finance, and rising debt costs, which worsen economic conditions, Kganyago said.
First National Bank CEO Jacques Celliers said the rate increase is expected.
"The SARB is normalizing interest rates following the emergency rate cuts it implemented during the height of COVID-19 and the lockdown. The gradual normalization of interest rates supports the ongoing economic recovery, particularly in light of global growth concerns and local events such as the KwaZulu-Natal floods," he said.
"The adjustment should also be viewed as a response to rising inflationary pressure as well as record-high fuel and food prices," Celliers said. "As a business, we are committed to providing ongoing support to our retail and commercial clients by facilitating their economic participation and helping local communities."