South African Central Bank hikes its interest rate by 75 basis points

By: Chime Amara

In a bid to fight the rising inflations, the South African Central Bank has again embarked on another aggressive interest rate hike for the South African rand by 75 basis points during its Committee meeting last week. This brings its current interest rate to 6.25% while the prime lending rate will be slated at 9.75% against the previous record of 9%.

This marks the sixth consecutive interest rate hike by the South African Reserve Bank (SARB) in 2022.

Having raised its interest rate by over 275 basis point from November 2021 till the present moment, analysts now expect the SARB to slow down in its rate of rate hikes during its final meeting for this year in November.

The committee members of the SARB have remained hawkish during its previous meetings so far this year. A more aggressive stance was exhibited by the committee members during its meeting last week. While two members voted for a 100 basis points hike, the remaining three voted for a 75 basis points instead.

The majority count members seem to have taken count of the reduction in the inflation rate which slowed down to 7.6% YoY in August against the previous record of 7.8% in July. Though this is still far above the committee target of 3%.

This means we can expect the interest rate hike to continue up to the following year till the committee's target is achieved.

Speaking on the need to cut down the high inflation rate, by all means, the SARB governor Lesetja Kganyago remarked that the committee will continue in its efforts in fighting inflations as failure to do so would be detrimental to the economy in the long run.

Above all, the SARB also revised its forecast for the economy to grow by 1.9% in 2022 against its previous forecast of 2%.

South African economy has been so much influenced by the effects of the Russian-Ukraine wars that increased the price of oil and other import products across the globe.