JOHANNESBURG - The South African Reserve Bank has announced a 25 basis point hike in the interest rates.
The repo rate is now at 7%.
The prime lending rate increases from 10.25% to 10.5%.
South African Reserve Bank Governor Lesetja Kganyago said that four members of the Monetary Policy Committee (MPC) preferred this action, while two favoured no change.
“The Committee agreed that inflation risks had intensified, and that the challenge of large and overlapping shocks would likely trigger second-round effects, requiring a monetary policy response," Kganyago said.
“Our decision was aimed at managing risks and ensuring that inflation returns to target.
“The forecast from our Quarterly Projection Model (QPM) shows one hike this quarter. As inflation falls later in the forecast, our model then has rates easing again, towards neutral levels. Real rates are lower this year, given higher inflation, so the policy stance is now less restrictive than it was in March.”