Another jumbo rate hike announced

Reserve Bank Governor, Lesetya Kganyago.


Interest rates are now at their highest since 2016 after the SA Reserve Bank hiked rates by 75 basis points for the third straight month.

Three members of the Monetary Policy Committee voted in favor of the 75 basis point hike, while two called for a 50 basis point hike.

The move brings the repo rate to 7% and the policy rate to 10.5%.

For a new home loan of R2 million at prime rate, the latest hike adds around R1,000 to the monthly installment. Since November last year, monthly payments on a R2 million loan are nearly R4,500 more expensive due to a rate hike.

The latest rate hike was in line with economists’ expectations.

On Thursday, SA Reserve Bank Governor Lesetya Kganyago warned of high inflation and weak economic growth.

The Monetary Policy Committee expects headline inflation to remain above its maximum target rate of 6% until the second quarter of 2023.

Headline inflation is only likely to fall back to the middle of the target range (4.5%) on a sustained basis around the second quarter of 2024. Economists expect interest rates not to be cut until inflation reaches that level.

The Reserve Bank is under pressure to raise rates to cool inflation – but also to protect the rand’s value.

Higher interest rates appeal to foreign investors chasing good returns. South Africa needs foreign money inflows to keep the rand stable and local interest rates have been attractive compared to other countries for many years. But in recent months, other countries – notably the US – have raised interest rates aggressively in a bid to dampen inflation. South Africa cannot afford to be left behind. On Thursday, the rand was at its best level in months.

However, the sharp rise in interest rates will inflict even more pain on the struggling South African economy and consumers already grappling with sky-high fuel and food prices and record load drops.

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