{"id":861838,"date":"2026-05-28T15:07:39","date_gmt":"2026-05-28T13:07:39","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=861838"},"modified":"2026-05-28T16:47:53","modified_gmt":"2026-05-28T14:47:53","slug":"reserve-bank-hikes-interest-rates-by-25-basis-points","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/861838\/reserve-bank-hikes-interest-rates-by-25-basis-points\/","title":{"rendered":"Reserve Bank hikes interest rates by 25 basis points"},"content":{"rendered":"\n

The South African Reserve Bank (SARB) has increased interest rates by 25 basis points amid rising consumer prices caused by the conflict in the Middle East. <\/p>\n\n\n\n

The central bank’s Monetary Policy Committee (MPC) decided to increase the repo rate to 7.0%, with the prime rate rising to 10.50%. <\/p>\n\n\n\n

Four of the six members of the MPC called for the hike, while two called for rates to remain as they are. <\/p>\n\n\n\n

While South Africa was widely expected to see interest rate cuts at the start of the year as inflation was under control, the nation was dealt a blow when the USA and Israel launched attacks on Iran. <\/p>\n\n\n\n

Iran’s subsequent shutdown of the Strait of Hormuz, where 20% of the world’s oil flows from, led to massive hikes in fuel prices.<\/p>\n\n\n\n

With fuel prices rising 11% in April, the headline consumer inflation figure rose to 4.0%. This was at the upper end of the Reserve Bank’s one-percentage-point tolerance band for its new 3% target.<\/p>\n\n\n\n

The SARB expects headline inflation averaging 4.4% in 2026 and 3.7% in 2027, before returning to the 3% target in 2027. There are, however, upside risks to the outlook. <\/p>\n\n\n\n

This comes amid higher oil prices in its forecast, which have led to higher food prices due to higher transport and fertiliser costs.<\/p>\n\n\n\n

On the positive side, SARB Governor Lesetja Kganyago has also said that South Africa’s economy is showing signs of life. <\/p>\n\n\n\n

This includes a recent positive outlook from Moody’s, strong terms of trade, and strong reforms from the state. <\/p>\n\n\n\n

Nevertheless, the SARB lowered its growth forecast for South Africa over the next two years, as the Iran war shock hit the economy while it was gaining momentum. <\/p>\n\n\n\n

“However, we face a painful combination of higher global uncertainty and reduced disposable income,” Kganyago said. <\/p>\n\n\n\n

“This will hit both investment and household consumption, which have been our main growth drivers.” <\/p>\n\n\n\n

He also referenced the recent floods in the Western Cape, Eastern Cape and North-West provinces, which have been impacted by severe, if localised damage, highlighting the risk of climate change.<\/p>\n\n\n\n

More pain incoming <\/h2>\n\n\n
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The governor added that the forecast from the Quarterly Projection Model (QPM) shows one hike this quarter. <\/p>\n\n\n\n

“As inflation falls later in the forecast, our model then has rates easing again, towards neutral levels,” he added. <\/p>\n\n\n\n

“Real rates are lower this year, given higher inflation, so the policy stance is now less restrictive than it was in March.” <\/p>\n\n\n\n

Due to the elevated uncertainty, the SARB also gave three scenarios for interest rates in the future. <\/p>\n\n\n\n

One involved a prolonged Middle East crisis, leading to higher food and oil prices, plus a weaker rand. <\/p>\n\n\n\n

The second involves the El Ni\u00f1o weather pattern, which brings drought to South Africa. The third scenario considers non-linear effects, i.e., big shocks that affect inflation. <\/p>\n\n\n\n

All of these scenarios implied higher inflation and lower growth. All three scenarios showed some additional monetary policy tightening. <\/p>\n\n\n\n

“The scenario with a longer Strait closure has inflation at about 5%, with two more hikes than the baseline,” said Kganyago. <\/p>\n\n\n\n

“With El Ni\u00f1o added, rates stay high for longer. The most adverse scenario puts all the risks together, causing inflation to peak above 6%, requiring three extra hikes.”<\/p>\n\n\n\n

He added that there has already been one global inflation surge this decade, and another could start soon. The central bank thus faces an uphill battle to bring inflation back to 3%.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The South African Reserve Bank (SARB) has decided to increase interest rates by 25 basis points amid heightened inflation. <\/p>\n","protected":false},"author":95,"featured_media":857353,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[2924],"class_list":["post-861838","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/861838","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=861838"}],"version-history":[{"count":8,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/861838\/revisions"}],"predecessor-version":[{"id":861866,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/861838\/revisions\/861866"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/857353"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=861838"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=861838"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=861838"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}