The Monetary Policy Committee (MPC) meets six times a year to set the repo rate. The MPC consists of up to seven members, including the Governor of the South African Reserve Bank (SARB) and other senior officials appointed by the Governor. The SARB hosts a media briefing every two months to release its MPC statement, following the meeting.
MPC Announcements
On 24 November 2022, SARB announced the repo rate increase by 75 basis points, the second steepest hike since September 2002, bringing it to 7.00% (ultimately bringing the prime rate to 10.5%). This followed a September 2022 announcement of 75 basis points, which although high, was largely expected by the market.
The interest rate announcements scheduled by the MPC for 2023 are as follows:
We will keep you updated with each announcement and forecast adjustment.
Inflation Outlook
South Africa’s national currency, the rand (ZAR), has declined against the US dollar (USD) throughout 2022, with the USD/ZAR rising from roughly 14.5 in early May to near 17.2, as of 18 November.
To protect the value of the rand, the SARB uses inflation targeting, which aims to maintain consumer price inflation in South Africa between 3% and 6%. These recent interest rate increases by SARB have been driven by a need to control the rate of inflation in recent months. South Africa's annual inflation rate eased to 7.4% in November of 2022 from 7.6% in the prior month, below market expectations of 7.5% but still above the upper limit of the target.
The SARB sees headline inflation returning to its 3.0–6.0% target band in the second half in 2023, but still upwardly revised its headline inflation forecasts for 2022 and 2023 to 6.7% and 5.4%, respectively1.
Interest Rate Outlook
With regard to future policy moves, the SARB reiterated its commitment to stabilise inflation around the midpoint of its target range. Economic and financial conditions are expected to remain more volatile for the foreseeable future. Therefore, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook.
The next monetary policy meeting is scheduled for 24–26 January 2023. FocusEconomics Consensus panelists see the SARB repo rate ending 2023 at 7.16% and 2024 at 6.50%2.
Economists’ projections can be varied, but the result is typically in the middle. A collection of estimates across the industry has allowed the team at Phoenix Bonds to put together an “average” interest rate forecast for 2023:
Rates are based on monthly data coming in, such as headline inflation. We’ll continue to keep you updated throughout the year as the data moves in real-time.
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