Repo rate hiked by 50 basis point amid fears of runaway inflation
Consumers will have to dig deeper in their pockets to make loan repayments as of Friday.
This after the Reserve Bank's Monetary Policy Committee announced a hike in interest rates.
The committee met on Thursday.
Four members of the MPC, constituting a majority, favoured an increase of 50 basis points - while only member preferred an increase of 25 basis points.
This puts the repo rate at 4.75% and the prime lending at 8.25%.
This is the fourth consecutive increase in interest rates, including changes from the November, January, and March meetings.
Governor Lesetja Kganyago says the central bank is looking to counter runaway inflation, which is forecast to breach the target range in the second quarter.
"Current repurchase rate levels reflect an accommodative policy stance through the forecast period, keeping financial conditions supportive of credit demand as the economy continues to recover.
"The implied policy rate path of the Quarterly Projection Model, 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," said Kganyago.
He admitted economic and financial conditions are expected to remain more volatile for the foreseeable future.
"In this uncertain environment, policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook. The MPC will seek to look through temporary price shocks and focus on potential second round effects and the risks of de-anchoring inflation expectations."
Last year saw the ongoing recovery of the South African economy from the Covid-10 pandemic, expanding by 4.9%.
According to the Reserve bank's estimates, the economy is expected to grow by 1.7% in 2022, revised down from 2.0% at the time of the March meeting.
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