The Monetary Policy Committee of the Reserve Bank has decided to hike the repo rate by a quarter of a percentage point to 6.75% . This means that the prime lending rate will rise to 10.25%.

Reserve Bank Governor Lesetja Kganyango made the announcement in Pretoria.

He says the rand has appreciated against major currencies, but remains undervalued.

Kganyago says economic growth for the year is now expected to be just 0.6% – down point one of a percentage point.

The Reserve Bank governor says the monetary policy committee decided that now was an opportune time to hike rates.

“Since the previous meeting of the Monetary Policy Committee(MPC), the near-term inflation outlook has improved, however, the longer term risks to inflation outlook remain elevated.

“The weaker exchange rate and the impact of higher oil prices have contributed to inflation since March 2018.

“The Bank’s measure of core inflation, which excludes food, fuel and electricity was 4.2 percent in October. Producer price inflation for final manufactured goods slowed to 6.2 percent in September from 6.3% in August.

“While remaining within the inflation target range throughout the forecast period, the SARB’s model projects an increase in headline inflation, albeit slightly lower than the September projection.” – additional reporting by Reuters

Watch MPC announcement below: