The Reserve Bank has decided to raise the repo rate by 25 basis points, taking it to 5.75%, Governor Gill Marcus said on Thursday.
“The Monetary Policy Committee (MPC) has decided to continue on its gradual normalisation path and raise the repurchase rate by 25 basis points to 5.75% per annum, effective from Friday, 18 July,” said Marcus.
The governor said given the expected inflation trajectory, the real repurchase rate remains slightly negative and well below its longer term neutral level.
She said the monetary policy stance remains supportive of the domestic economy and that any future moves will be gradual and highly data dependent.
At its last MPC sitting in May, the bank continued to hold the view that it is in a rising interest rate cycle.
Marcus reiterated that monetary policy should not be seen as the growth engine of the economy.
“The sources of the below par growth performance are largely outside the realms of monetary policy. In the short term, an improvement in the interaction and relationships between management and labour is essential to foster a climate of trust and confidence, and get South Africa back to work,” she said.
The Reserve Bank targets inflation between 3% and 6%.
In January, the bank hiked the repo by 50 basis points. At the time the repo rate — which is the scale at which the bank lends money to commercial banks — had up until January 2014 left the repo rate unchanged at 5% since July 2012