Cape Town – The South African Reserve Bank has increased interest rates by 50 basis points, against market expectations.
According to Business Day, Thursday’s move takes the repo rate to 7.75%, bringing the cumulative increase to 425 bps since it was slashed to 3.5% during the early part of the Covid-19 pandemic in 2020.
The sharp increase comes in the wake of high inflation.
However, Reserve Bank Governor Lesetja Kganyago said that the decision was the central bank’s best way to counter the rising inflation, EWN reported.
ALSO READ | SA economy shrinks by 1.3% as power shortages escalate
“We are serious about tackling inflation and we have been taking steps since November 2021 to tackle inflation and today we have taken a further step,” the report quoted Kganyago as saying.
He added: “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.”
High fuel, food and electricity prices are believed to be behind the stubborn inflation
South Africa’s economy tumbled below pre-pandemic levels in the last three months of 2022 as record power shortages hit activity.
The gross domestic product of the country contracted by 1.3% in the fourth quarter, worse than expected by analysts.
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Compiled by Betha Madhomu
