In March the Monetary Policy Committee decided to increase the repurchase rate by 50 basis points to 7.75% per year, with effect from the 31st of March 2023. Three members of the Committee preferred the announced increase. Two members preferred a 25 basis points increase.
The revised repurchase rate is now less accommodative and is more consistent with the current view of risks to inflation. The aim of policy is to anchor inflation expectations more firmly around the mid-point of the target band and to increase confidence of attaining the inflation target sustainably over time.
Guiding inflation back towards the mid-point of the target band can reduce the economic costs of high inflation and enable lower interest rates in the future. Achieving a prudent public debt level, increasing the supply of energy, moderating administered price inflation and keeping wage growth in line with productivity gains would enhance the effectiveness of monetary policy and its transmission to the broader economy.
Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook.
The attached Table sourced from the reserve bank paints the picture of the past four years as well as predictions over the next three years. If you have any queries in this regard please do not hesitate to contact us for professional advice.