JOHANNESBURG: South African Reserve Bank (Sarb) governor Lesetja Kganyago said on Thursday the bank would increase the repo rate by 50 basis points. This means the repo rate, which is the rate at which the Sarb lends money to banks, will rise to 6.75%.
The prime lending rate, the figure charged by banks to customers, will increase to 10.25%. Kganyago says a number of factors were taken into consideration particularly around rising inflation. He also gave a breakdown of the monetary policy committees’ decision. “Three members supported a 50 basis increase, two members preferred a 25 basis increase while one member preferred no change.”
Kganyago says the MPC remains focused on containing inflation. “Despite the increase the purchase real repurchase rate remains low given the higher expected increase over the period.” Many economists had urged the bank to take the bold step and raise interest rates by 50 basis points saying it would help in the long run. The announcement was made in the capital after a three-day meeting of the Sarb’s Monetary Policy Committee (MPC).
This comes after the bank increased rates by 25 basis points in both July and November 2015. Earlier today, Statistics South Africa announced that producer price inflation had risen to 4.8% year-on-year for December from 4.3% in November.
