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The Monetary Policy Committee (MPC) of the South African Reserve Bank increased the repurchase
rate (repo rate) by 50 basis points to 8.25%.


The hike means that the repo rate will be 8.25% every year beginning on May 26, 2023, with the
prime rate currently at 11.75%.


South African Reserve Bank (SARB) Governor Lesetja Kganyago made the announcement during a
media event in Pretoria on Thursday, May 25, 2023.


“At the current repurchase rate level, policy is restrictive, consistent with elevated inflation and
risks. The policy stance aims to anchor inflation expectations more firmly around the mid-point of
the target band and to increase confidence of attaining the inflation target sustainably over time.


“Guiding inflation back towards the mid-point of the target band can reduce the economic costs of
high inflation and achieve lower interest rates in the future. Reaching a prudent public debt level,
increasing the supply of energy, moderating administered price inflation, and keeping wage growth
in line with productivity gains would enhance the effectiveness of monetary policy and its
transmission to the broader economy,” Kganyago said.


The SARB has raised the repo rate at least ten times since November 2021.
He said that the economic and financial conditions are expected to remain more volatile for the
foreseeable future.


Kganyago further added in this volatile environment, monetary policy decisions will remain data-
dependent and sensitive to the balance of risks to the outlook.” The MPC will examine transient
price shocks with a focus on potential second-round effects and the dangers of de-anchoring
inflation expectations. “The Bank will continue to keep a close eye on funding markets for signs of
stress.


The Governor said that economic growth has been volatile for some time and prospects for growth
remain uncertain.  


He announced that the GDP growth forecast for 2024 and 2025 remains unchanged from the
previous meeting, at 1.0% and 1.1%, respectively.


The SARB’s forecast for global growth in 2023 and 2024 is revised higher to 2.4% (from 2.0%), and to
2.7% (from 2.5%), respectively.


Meanwhile, the April World Economic Outlook of the International Monetary Fund (IMF) forecasts
global growth at 2.8% and 3.0% for 2023 and 2024.


“For 2023, the Bank’s forecast for GDP growth is slightly higher than in March, at 0.3%. Energy and
logistical constraints remain binding on South Africa’s growth outlook, limiting economic activity and
increase costs. We estimate loadshedding alone to deduct 2 percentage points from growth this
year,” he said.


Kganyago emphasised that an improvement in logistics and a sustained reduction in load-shedding,
or increased energy supply from alternative sources, would significantly raise growth.

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