Reserve Bank raises interest rates on inflation concerns
In a very close call, Reserve Bank governor Lesetja Kganyago raises rates, as the long-term inflation outlook deteriorates
The SA Reserve Bank’s monetary policy committee (MPC) increased the repo rate by 25 basis points on Thursday, for the first time in two years. “Since the previous meeting of the MPC, the near-term inflation outlook has improved; however, the longer-term risks to the inflation outlook remain elevated. The weaker exchange rate and the impact of higher oil prices have contributed to increasing inflation since March 2018. At the same time, domestic growth remains weak,” Reserve Bank governor Lesetja Kganyago said. Analysts were at odds over what the MPC’s move would be. Of the 21 economists in a Bloomberg survey, 11 predicted that the repurchase rate would be increased to 6.75% and the rest expected no change. Analysts haven’t been this divided on a rate decision since March 2016, which is also the last time the Bank hiked rates. “The approach of the MPC is to look through the first-round effects and focus on the possible second-round effects of supply-side shocks. However, shocks of a ...
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