The South African Reserve Bank lifted interest rates by 25 basis points to 6.00 percent today (Thursday 23/06/2015).
The bank last raised lending rates in July 2014, but since then Africa’s most advanced economy has been constrained by chronic power shortages along with other structural obstacles.
“The committee is concerned that failure to act against these heightened pressures and risks will cause inflation expectations to become entrenched at higher levels,” said Governor Lesetja Kganyago.
“The MPC has therefore decided to continue on its path of gradual policy normalisation.”
Increases to electricity tariffs, which the bank previously flagged as an upside threat to its inflation outlook, did not materialise after state utility Eskom’s application for double digit increases was turned down in June by the national energy regulator.
“Although the risks of higher electricity tariffs did not materialise as yet, other upside risks persist,” Kganyago said.
The increase has been described as an economic blow for cash-strapped consumers, particularly those in lower income groups with high mortgages and monthly repayments exerting pressure on already over-burdened budgets by Andrew Golding, chief executive of the Pam Golding Property group.
Golding added that cash strapped South Africans had to contend with a basket of rising costs such as municipal rates, electricity tariffs, fuel and food, among others.