Rate hike reaction

“The surprise 50bps increase, resulting in a repo rate of 7.75%, comes at a time of renewed global volatility, with the strain in the banking sector in developed economies partly due to the post-pandemic interest rate hike cycle.

The MPC has turned back towards hawkishness, with three members out of the five voting for the 50bps increase – the concern of the Committee being the performance of the Rand going forward, given higher risk premia, loadshedding and stubborn food and fuel inflation. After softening for three months, Consumer Price Inflation surpassed market expectations and reached to 7.0% y/y in February.

This may be ‘it’ and South Africans will be in a holding pattern for the rest of the year, but there is a lot of uncertainty at the moment, so I would not rule out another 25bps hike this year.”