South Africa

South Africa Monetary Policy September 2022

South Africa: SARB meets expectations and delivers another 75 basis point hike in September

At its 22 September meeting, the Monetary Policy Committee of the South African Reserve Bank (SARB) increased the repurchase rate by a further 75 basis points, bringing it to 6.25%. The move, which came on the heels of Julys same-size increase, had already been priced in by markets. The decision regarding the size of the hike—the sixth consecutive increase since policy normalization started in November 2021—was once again not unanimous: Two of the five members preferred a 100 basis point increase.

The move was driven by the Banks assessment that risks to the inflationary outlook remain skewed to the upside; the Bank sees headline inflation above the upper bound of the SARBs 3.0–6.0% target band until Q2 2023. However, both headline and core inflation expectations for 2022 were unchanged, and, for the first time in months, they were downwardly revised for 2023 and 2024. This is largely due to the assessment that both food and fuel inflation will moderate ahead. Meanwhile, the Bank revised growth forecasts for 2023 and 2024 upward to 1.4% and 1.7%, respectively, further supporting the SARBs tightening cycle.

With regard to future policy moves, the SARBs tone remained hawkish but vague. It reiterated its commitment to stabilize inflation expectations around the midpoint of its target range. Meanwhile, the Bank noted that “economic and financial conditions are expected to remain more volatile for the foreseeable future,” and that, therefore, “monetary 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 24 November.

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