South African central bank governor’s comments on rate decision

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JOHANNESBURG (Reuters) – Below are some quotes from South African Reserve Bank Governor Lesetja Kganyago on Thursday as he announced the central bank’s decision to raise benchmark repo rate by 50 basis points to 4.75%.

INFLATION

“As a result of higher global food prices, local food price inflation is also revised up and is now expected to be 6.6% in 2022 (up from 6.1%), and 5.6% in 2023 (up from 5.1%). Food price inflation is forecast to ease to 4.2% in 2024 (down from 4.4%).”

“The Bank’s forecast of headline inflation for this year is revised higher to 5.9% (from 5.8%), primarily due to the higher food and fuel prices.”

“Core inflation is forecast lower at 3.9% in 2022 (down from 4.2%) due to lower services price inflation.”

ECONOMIC GROWTH

“The economy is expected to grow by 1.7% in 2022, revised down from 2.0% at the time of the March meeting. This is due to a combination of short-term factors, including the flooding in Kwa-Zulu Natal and the continued electricity supply constraints.”

“The economy is forecast to expand by 1.9% in both 2023 and 2024. At these rates, growth remains well above a low rate of potential, impacted by loadshedding, infrastructure and policy constraints.”

“Overall, and after revisions, the risks to the medium-term domestic growth outlook are assessed to be balanced.”

DECISION

“Against this backdrop, the MPC decided to increase the repurchase rate by 50 basis points to 4.75% per year, with effect from the 20 of May 2022. Four members of the Committee preferred the announced increase and one member preferred a 25 basis point rise in the repo rate.”

“The implied policy rate path of the QPM, given the inflation forecast, indicates gradual normalisation through to 2024. As usual, the repo rate projection from the QPM remains a broad policy guide, changing from meeting to meeting in response to new data and risks.”

(Reporting by Olivia Kumwenda-Mtambo, Alexander Winning and Promit Mukherjee; Editing by James Macharia Chege)

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