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PPS Investments: MPC – 22 September 22

22 September 2022 Reza Hendrickse, Portfolio Manager at PPS Investments

The Monetary Policy Committee (MPC) increased the repo rate by a further 75-basis points to 6.25%, which is close to where it was before the pandemic. Three members of the committee opted for 75-basis points, while two voted in favour of a 100-basis point increase.

In his address, the Reserve Bank Governor characterised the global economy as entering a period of persistently high inflation and weaker economic growth. The SARB’s forecast for global growth has been revised downwards to 3.0% in 2022, and 2.0% in 2023 (compared to 3.3% and 2.5% respectively at the July meeting).

The SARB has also revised lower its forecast for South African growth to 1.9% in 2022 (compared to 2.0% previously) but revised higher its projections for 2023 and 2024. Loadshedding, the weaker global macro environment and geopolitical risks are expected to remain headwinds to growth, but the trend in household spending and investment are more constructive.

Headline inflation remains unchanged at 6.5% for this year, with the rise in global oil prices having eased since the last MC meeting, and local electricity price inflation expected to be slightly lower than previously thought. Headline inflation is expected to moderate to 5.3% next year on declining food and fuel prices, and to 4.6% in 2024, which is around the mid-point of the SARB’s inflation targeting range.

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