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Interest rate hiked by 50 basis points


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Interest rate hiked by 50 basis points

South African rand
Photo by Reuters

25th May 2023

By: News24Wire


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The South African Reserve Bank's monetary policy committee hiked interest rates by 50 basis points to 8.25%. This is in line with what many economists and the market expected.

The earlier consensus expectation was for 25 basis points, but the rand's crash to a record low in the wake of US allegations that Russia received arms in South Africa has raised inflation risks. A weaker rand will fuel inflation.


The members of monetary policy committee all voted unanimously in favour of the hike. 

The central bank has now hiked rates by 475 basis points of tightening since November 2021.


"Economic and financial conditions are expected to remain more volatile for the foreseeable future" Reserve Bank Governor Lesetja Kganyago said on Thursday. 

"In this uncertain environment, monetary policy decisions will continue to be data dependent, and sensitive to the balance of risks to the outlook."

Kganyago said that the bank had been saying for some time that it was tightening monetary policy but that it had not yet reached "restrictive territory".

"Now, we have just reached restrictive territory. We have got to see the effects of this policy stance and what it means.

"In the long term, South Africans will benefit from this tight stance, because the stance will bring down inflation. And the cries of South Africans had been that inflation is eroding their incomes.

"Does it hurt? Yes in the short term. But we have got to take the short-term pain in the interest of long-term gain." 

On a new home loan of R2-million at the prime rate, the latest increase hikes the monthly instalment by around R690. Since November 2021, monthly payments on a R2-million home loan are almost R6 200 more expensive due to a raft of rate hikes.

South Africa's annual inflation rate reached an 11-month low in April, cooling to 6.80% from 7.10% in March, it was announced on Tuesday. Inflation slowed by more than economists expected.

However, food inflation continued to remain sticky around 14-year highs, at 13.90% - from 14% the previous month.

Some economists expect the first interest rate cut only at the start of next year.


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