Rate hike reaction from Angelika Goliger: EY Africa Chief Economist
25 Nov, 2022

Rate hike reaction from Angelika Goliger: EY Africa Chief Economist:

Angelika Goliger – EY Africa Chief Economist:

A 75bps hike in the repo rate was to be expected, given yesterday’s higher inflation print of 7.6% and a rise in core CPI – showing that inflation is becoming broad-based.

From this meeting we are seeing that weaker economic outlook becoming more of a concern to the MPC, with two out of five the members voting for a 50bps increase instead of 75bps. This is a shift in direction from the last meeting, where two members opted for a 100bps increase. But there is a clear message that the economic outlook is becoming increasingly challenging, as we are heading into a recessionary environment globally, yet high inflation is becoming more entrenched throughout the South African economy.

Looking ahead, we will still see increases in the repo rate, but these will likely be at a slower pace. I am expecting a couple more smaller rate rises, of 50bps and 25 bps at the first two meetings of 2023. And then hoping we will be at the top of the rate hike cycle – although not expecting rates to come down anytime in 2023

The SARB is projecting that inflation will remain above 6% in the first half of 2023, thereafter declining to 4.4% in the third quarter of the year. I would say this is a realistic outlook, as we are seeing inflation begin to edge lower in some major markets, such as the US. But we are living in volatile and uncertain times and the factors that drove the current inflationary environment are still very much at play

The outlook for the repo rate is looking slightly higher in 2023 compared to the September forecast, in line with the upward revision in the inflation numbers in the first half of 2023


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