South Africa Monetary Policy March 2022

South Africa

South Africa: SARB meets expectations and delivers third consecutive rate hike in March

March 24, 2022

At its 24 March meeting, the Monetary Policy Committee of the South African Reserve Bank (SARB) voted to increase the repurchase rate by 25 basis points, bringing it to 4.25%. The move, which markets had priced in, marked the third consecutive rate hike since policy normalization started in November 2021. The decision was once again not unanimous with regard to the size of the hike; two members voted to increase the repo rate by 50 basis points.

The global economic rebound, ongoing supply shortages, aggressive policy easing and the outbreak of the Russia-Ukraine war have sent commodity prices spiraling. The combination of these factors prompted the Bank to upwardly revise its headline and core inflation expectations through 2024 amid higher inflationary pressures for food and fuel. Additionally, the Bank reiterated that risks to the outlook are skewed to the upside, although inflation is seen remaining withing the SARB’s 3.0–6.0% target band over the forecast period. With regard to the economy, the Bank also upwardly revised its growth outlooks for 2022 and 2023, partly due to higher commodity export prices, allowing for a quicker reduction of the output gap. This, coupled with the SARB’s assessment that the risks to the medium-term growth outlook continue to be balanced, provided room for it to further tighten conditions.

With regard to future policy moves, the SARB’s tone was unchanged from the previous communiqué, as it still saw a gradual normalization path through 2024, given its current inflation forecasts. That said, the SARB acknowledged significant current uncertainty, adding that future decisions will continue to be dependent on data and the balance of risks; it will “seek to look through temporary price shocks and focus on potential second round effects and the risks of de-anchoring inflation expectations”.

Commenting on the potential moves of the SARB going forward, Andrew Matheny and Bojosi Morule, analysts at Goldman Sachs, said:

“We expect a continued gradual tightening of monetary policy with our forecast for 75 basis points of rate hikes (in 25 basis point increments) by end-2022. We see risks to our forecast tilted towards more front-loaded tightening, with a material risk of a 50 basis point rate hike at an upcoming MPC meeting in the event of further hawkish developments.”

The next monetary policy meeting is scheduled for 19 May.

FocusEconomics Consensus panelists see the SARB repo rate ending 2022 at 4.86% and 2023 at 5.54%.


Author:, Economist

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South Africa Monetary Policy March 2022

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


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