Central Bank of South Africa decides to raise the basic interest rate from 6.25% to 7%

The Central Bank of South Africa decided this Thursday (24) to raise its basic interest rate by 75 basis points (bp), from 6.25% to 7%. According to the statement, the decision was not unanimous: three Committee members preferred the announced increase, while two of them voted for a 50 bp increase.

The South African BC points out that, in the second quarter of this year, inflation surpassed the upper limit of the target and should remain above it until the second quarter of 2023.

“High inflation and weak economic growth continue to shape global conditions along with monetary and fiscal policy responses. The war in Ukraine drags on, hurting trade and driving up energy, food and other commodity prices.

Thus, the Central Bank predicts that the country’s economy should grow 1.8% (from 1.9%) this year and 0.4% in the third quarter. Fourth-quarter growth is forecast to be just 0.1%. “The economy is expected to grow 1.1% in 2023 (from 1.4%) and 1.4% in 2024 (from 1.7%), below previous projections”, he points out.

With regard to inflation, the forecast for this year and next is slightly higher at 6.7% and 5.4%, respectively. In 2024 and 2025, we expect inflation of 4.5%.

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