The South African Reserve Bank (SARB) has increased the repo rate by 25 basis points to 7%, following a Monetary Policy Committee (MPC) decision shaped by rising inflation and increased global economic uncertainty.

The move comes after consumer price inflation for April climbed to 4%, driven by geopolitical tensions, supply-side shocks, and broader global price pressures.

The MPC vote was not unanimous, with four members supporting the rate hike while two preferred to keep rates unchanged, reflecting differing views on the appropriate response to evolving risks.

SARB Governor Lesetja Kganyago explained that the committee viewed inflation risks as having intensified, particularly due to overlapping global shocks that could trigger second-round effects in the domestic economy.

He emphasised that the bank’s objective remains returning inflation to its 3% target over the medium term, while maintaining a data-dependent, meeting-by-meeting approach to future decisions.Although the rate hike signals a tighter stance, Kganyago noted that the overall policy position is now less restrictive than it was in March.The central bank also revised its macroeconomic outlook, lowering growth forecasts for the next two years while raising inflation projections.Headline inflation is now expected to average 4.4% this year and 3.7% next year, before returning to the 3% target by 2028.Core inflation is also expected to rise, peaking early next year.

Despite downside risks to growth, SARB maintains that the economy’s underlying fundamentals remain stable, although households continue to feel pressure from higher living costs and weaker purchasing power globally.

The rate adjustment will take effect from 29 May, and reflects SARB’s cautious approach to balancing inflation control with economic growth concerns in a volatile international environment.