S. African central bank raises repo rate

The South African Reserve Bank (SARB) on Thursday decided to increase the repurchase rate by 25 basis points to 6 percent per annum with effect from July 24 this year.

Taking into the financial situations at home and abroad, the SARB's Monetary Policy Committee (MPC) has decided to continue on its path of gradual policy normalisation, said Lesetja Kganyago, SARB Governor.

Four members at the MPC favoured a 25 basis point increase, while two members favoured an unchanged stance, according to Kganyago.

The expected inflation trajectory implies that the real repurchase rate remains low and possibly still slightly negative at times, and below its longer term average, he said.

"The monetary policy stance therefore remains supportive of the domestic economy. The continuing challenge is for monetary policy to achieve a fine balance between achieving our core mandate of price stability and not undermining short term growth unduly," said the governor.

Monetary policy actions will continue to be sensitive, to the extent possible, to the fragile state of the economy, he said.

"As before, any future moves will therefore be highly data dependent," he added.

Gary Palmer, CEO of Paragon Lending Solutions, said banks are now more than ever before likely to continue to implement stricter lending regulations.

"An interest rate hike has been on the cards for a long time, especially with inflation increasing fueled by petrol and food price hikes and the devaluing of the rand, which may reduce business confidence further. As such, all indications are that consumers will battle with the price hikes and consequently default on loan payments and lead to banks tightening their lending restrictions once again," he said in a web poster. Endit