The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) raised the policy rate by a quarter of a percentage point to 7%, effective May 29.
The prime lending rate now stands at 10.5%.
The decision was supported by four of the six committee members, with two preferring no change.
The bank cited upward risks to the inflation outlook, linked in part to the ongoing conflict in the Middle East, which has pushed up oil prices and contributed to higher fuel costs in SA.
Inflation rose from 3.1% in March to 4% in April.
SARB Governor Lesetja Kganyago said inflation is expected to average 4.4% this year.
“New results from our main survey of inflation expectations will only be available next month. However, market indicators and analyst expectations are edging higher. Given the forecasts, we see upside risks to inflation. Against this backdrop, the committee decided to increase the policy rate by 25 basis points, to 7%, effective from May 29. Four members preferred this action, while two favoured no change,” Kganyago said.
“The committee agreed that inflation risks had intensified, and that the challenge of large and overlapping shocks would likely trigger second-round effects, requiring a monetary policy response,” he added.
—SABC—
