The South African Reserve Bank (SARB) has raised the repo rate by 50 basis points, citing higher power and fuel prices as the main factors for rising inflation.
On Thursday afternoon, Reserve Bank Governor Lesetja Kganyago made the announcement.
"The bank's headline inflation prediction for this year has been raised to 5.9% [from 5.8%], owing mostly to increased food and gasoline prices."
As the bank attempts to control inflation, those with bonds and credit cards will be paying significantly more for their debt.
With a series of cuts in the repo rate, the SARB provided significant comfort to South Africans during the commencement of the COVID-19 epidemic in March 2020.
However, the scenario has changed as a result of shifting global conditions, such as the crisis in Ukraine and increasing fuel and energy prices.
According to Kganyago, a number of factors are driving inflation, including rising energy and oil prices as a result of the situation in Ukraine.
"Russia's battle in Ukraine is expected to drag on for the remainder of the year, with huge implications for world pricing." Oil prices have risen sharply since the start of the war and may continue to rise as energy market stresses worsen. Short- and medium-term concerns remain associated with electricity and other administered prices. Higher diesel and coal prices may cause us to revise our forecasts upward.
2023 power price forecast Given public sector wage growth assumptions below inflation and rising gasoline and food price inflation, a still moderate nominal wage forecast poses a significant risk."
However, he predicted that the economy will rebound from the pandemic, but not to its full potential. "Average polled inflation predictions for 2022 have increased to 5.1 percent. According to market assessments, inflation expectations have risen to 5.9%."
Although the increase in the repo rate has been anticipated for some time, it will nevertheless be a blow to individuals who are already in debt.
The governor stated that the monetary policy committee would continue to monitor inflation and take additional action if necessary.
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