SARB Governor Lesetja Kganyago said the statement reflects that inflation globally is high.

“You can rest assured that this central bank means business about price stability – because that is ... what we are tasked with in terms of the Constitution of the Republic of SA,” he added.

The raise is the eighth since the central bank began its hiking cycle at the end of 2021 when it adopted a combative stance to tame spiralling inflation.

The interest rate decision at the first meeting of 2023 brings South Africa’s prime lending rate to 10.75%.

The 25bps increase follows the consecutive jumbo hikes of 75 basis points each, which signals the Reserve Bank may be at the end of its hiking spell.

Before the rate announcement, economists had already predicted that SARB would hike again, but had been split on whether it would be a 25 basis points or 50 basis points increase.

The increase in the repo rates comes despite December’s surprise inflation numbers,  which showed a slight cooling off to 7.2%. South Africa is also contending with the worst power outages since load-shedding was first implanted 15 years ago, a concern the SARB has flagged as a risk to the country’s financial stability.

Kganyago said South Africa’s prospects for growth were more uncertain than usual, in part due to extensive load-shedding, pushing the bank to lower its GDP growth projections for the year.  The Reserve Bank now forecasts growth of 0.3%.

“The forecast incorporates an assumption of increased load-shedding in each year compared to what was pencilled in at the time of the November meeting,” Kganyago said.

“A material reduction in load-shedding would significantly raise growth. There could also be a higher investment in alternative energy sources as firms and households offset the impact of load-shedding,” he said.

Highlights:

• GDP growth for 2023 is now forecast at only 0.3% due to load-shedding and other constraints. It’s forecast at 0.7% in 2024, and 1% in 2025. A material reduction in load-shedding could significantly raise growth.
• Headline inflation for 2023 is unchanged at 5.4% and slightly higher at 4.8% for 2024. In 2025 4.5% is expected.
• Forecast for core inflation is somewhat lower at 5.2% in 2023 (down from 5.5%) and 4.7% in 2024 (down from 4.8%).
• Food price inflation was 9.2% in 2022, and is seen slowing to 7.3% in 2023, and 4.4% in 2024.

 Moneyweb