Kganyago: Increased inflation remains a risk to economy

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Kganyago: Increased inflation remains a risk to economy

Reserve Bank Governor Lesetja Kganyago has announced that the repo rate has been increased by 75 basis points to 5.5%.

South African Reserve Bank (Sarb) Governor Lesetja Kganyago. Picture: @SAReserveBank/Twitter
  • South African Reserve Bank
  • Repo rate
  • Lesetja Kganyago
  • Inflation

JOHANNESBURG – Concerns that inflation will continue to rise due to oil prices remaining high along with subdued global and local growth just some of the reasons given by the Reserve Bank to hike the repo rate.

Reserve Bank Governor Lesetja Kganyago has announced that the repo rate has been increased by 75 basis points to 5.5%. This increases the prime lending rate to 9%.

The announcement comes after the monetary policy committee met to decided on the rates.

“Three members of the committee preferred the announced increase. One member preferred a 100 basis
points increase. Another member preferred a 50 basis point increase.”

Economists had predicted that the repo rate would be hiked with the latest inflation figure of 7.4% last month sounding alarm bells.

Kganyago said the war in Ukraine had seen higher fuel prices with food inflation increasing as a result.

He said the outlook wasn’t good: “The risks to the inflation outlook are assessed to the upside. Global producer price and food price inflation continue to rise higher in recent months and may do so again.”

He said increased inflation – as a result of high fuel prices – remained a risk to the economy.

“Higher than expected inflation has pushed major central banks to accelerate the normalisation of policy rates, tightening global financial conditions and raising the risk profiles of economies needing foreign capital.”

The governor said the economy would expand though albeit down from last year: “Last year, the South African economy expanded by 4.9%. This year, the economy is expected to grow by 2% revised up from 1.7%.”

Those in debt were warned that the repo rate would be hiked, the only question was by how much.

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