South Africa: Reserve Bank Expected to Raise Rates By At Least 25 Basis Points This Week

The Monetary Policy Committee of the SA Reserve Bank will almost certainly pull the trigger and raise its key repo rate by at least 25 basis points on Thursday. Global and domestic inflation pressures are forcing its hand.

The bi-monthly, three-day meeting of the SA Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC) will end on Thursday with a 25 basis-point hike in its repo rate, which will take the prime lending rate to 7.5%. That is the overwhelming consensus of economists polled by Reuters and Finder.com.

Consumer inflation in South Africa raced to 5.9% in December, a five-year high near the top of the central bank’s 3-6% target range, against the backdrop of mounting global and domestic price pressures.

The SARB wielded the knife in 2020 when it slashed rates by 300 basis points to historic lows in the face of the economic meltdown and uncertainties unleashed by the pandemic. However, this unprecedented policy of accommodation has now run its course and the MPC began the tightening cycle in November with an increase then of 25 basis points.