South Africa Monetary Policy May 2022

South Africa

South Africa: SARB meets expectations and delivers fourth consecutive rate hike in May

May 19, 2022

At its 19 May meeting, the Monetary Policy Committee of the South African Reserve Bank (SARB) voted to increase the repurchase rate by a further 50 basis points, bringing it to 4.75%. The move, which markets had priced in, marked the fourth consecutive hike since policy normalization started in November 2021. The decision was once again not unanimous with regard to the size of the hike, with one of the five members voting to increase the repo rate by 25 basis points.

Ongoing supply shortages stemming from the war in Ukraine and lockdowns in China have exacerbated supply shocks and kept commodity prices elevated. This has led to the Bank’s upward revision of its headline and core inflation expectations through 2024—barring core inflation expectations for 2022—amid predictions of higher inflationary pressures for food and fuel. Additionally, the Bank reiterated that risks to the inflationary outlook are skewed to the upside. Inflation is seen remaining just within the SARB’s 3.0–6.0% target range over the forecast period, although in the short-term, it is expected to surpass the upper bound of the target band. With regards to the economy, the Bank’s growth estimates for 2023 and 2024 were unchanged, and it assessed that the risks to the medium-term growth outlook continued to be balanced.

With regard to future policy moves, the SARB’s tone was unchanged from its previous communiqué. It still sees a gradual normalization path through 2024, given its current inflation projections. That said, the SARB acknowledged that “economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook”.

The next monetary policy meeting is scheduled for 21 July.

FocusEconomics Consensus panelists see the SARB repo rate ending 2022 at 5.15% and 2023 at 5.56%.

Author:, Economist

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South Africa Monetary Policy Chart

South Africa Monetary Policy May 2022

Note: Repo rate in %.
Source: South African Reserve Bank (SARB).

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