By Aaisha Dadi Patel
JOHANNESBURG--The South African Reserve Bank on Thursday raised its main repo rate to 4% from 3.75%, saying a gradual rise in the repo rate will anchor inflation expectations and moderate the future path of interest rates.
Gov. Lesetja Kganyago said the bank took the decision at the monetary policy committee's first meeting of the year because the environment is uncertain and the bank is taking measured steps to deal with inflation. This is the bank's second consecutive increase after it kept the rate at a record low of 3.5% from April 2020 to November 2021 to provide economic relief amid the coronavirus pandemic.
Four members of the committee voted to increase rates, while one member preferred a hold, said Mr. Kganyago.
He added that the bank's quarterly projection model indicates "gradual normalisation" in the first quarter of 2022 and into 2023 and 2024, but stressed that any rate increases would be based on economic developments.
The SARB now expects the gross domestic product of Africa's most developed economy in 2021 to be at 4.8% down from a 5.2% expansion predicted in November, while the GDP forecast for 2022 remained unchanged at 1.7%
"The deceleration in growth from 2021 to 2022 is primarily a result of the fading rebound from the pandemic, alongside a climbdown from high export prices," Mr. Kganyago said. "Economic and financial conditions are expected to remain more volatile for the foreseeable future."
Rising energy and food prices have pushed up South Africa's consumer-price inflation in recent months. Consumer price inflation was 5.9% in December, the eighth consecutive month in which annual inflation was higher than the midpoint of the central bank's target range of 3% to 6%.
The bank's forecast of headline inflation for 2022 was revised higher to 4.9% from 4.3%, and is expected to moderate to 4.5% in 2023 and in 2024.
Write to Aaisha Dadi Patel at aaisha.dadipatel@wsj.com
(END) Dow Jones Newswires
01-27-22 0901ET
