Higher rates for longer is the hot topic of conversation amongst South Africans. Lesetja Kganyago, Governor of the South African Reserve Bank (SARB), shocked market participants with a higher-than-expected 50-basis point hike, announced Thursday, the 30th of March 2023. This decision brings the repo rate to 7.75% and the prime rate to 11.25%, “the highest level since 2019.” With the U.S. Federal Reserve hiking rates by 25 basis points in the last FOMC meeting, many had expected the SARB to follow suit, but South Africans are now left to digest a shock 50-basis point rate hike.
With rolling blackouts significantly “pushing up the cost of living,” sticky inflation in South Africa is “shaped primarily by fuel, electricity, and food.” While headline inflation is forecast to remain above the upper target band until at least the third quarter of 2023, it is only expected to sustainably revert to its mid-range target by the fourth quarter of 2024.
While “inflation pressures remain a risk” worldwide, the FED’s preferred inflation indicator, the personal consumption expenditures price index excluding food and energy, came in cooler than expected, rising 0.3% for February, lower than the 0.5% January increase. The data “looks promising for investors,” providing some much-needed relief that “interest rate hikes are helping ease price increases.”
Sources: Bloomberg, BusinessLive, CNBC, News24, South African Reserve Bank, Trading View
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