SA gets another interest rate hike

The Monetary Policy Committee of South Africa has taken a decision to increase the repurchase rate by 25 basis points to 7% per annum, effective from 18 March 2016.

It was the third successive increase, with analysts expecting several more in 2016 amid a challenging economic cycle in the country.

“Given upside risks to inflation forecast and the protracted period of the expected breach, MPC decided that further tightening was required,” said Lesetja Kganyago, governor of the Reserve Bank of South Africa.

He said that three members favoured a 25 basis point increase while three members preferred no change. “Ultimately the committee decided on an increase.”

The MPC said it faced the continuing dilemma of a deteriorating inflation environment and a worsening growth outlook.

The growth challenges facing the economy are compounded by the deteriorating outlook for global growth, the governor said.

“The Committee remains concerned about the weak growth outlook amid negative business and consumer confidence”.

Although inflation forecast has improved moderately since last MPC, it remains concerned about protracted nature of the breach of target, the governor said.

The exchange rate of the rand continues to be highly volatile and vulnerable to changes in both domestic and external developments.

The rand traded 2% firmer against the dollar, at R15.32  at 15h30 on Thursday.

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SA gets another interest rate hike