More interest rate hike pain on the horizon as inflation sticks

South Africa’s central bank will likely extend its tightening cycle and push rates cuts further into the future amid countrywide power outages and currency weakness, analysts said, adding to inflationary pressures straining businesses and households. The South African Reserve Bank – which is facing a dilemma of how to keep a lid on inflation without further stifling already anaemic economic growth – has hiked its main lending rate by 425 basis points since November 2021.

Sarb Deputy Governor Rashad Cassim acknowledged in an interview with Reuters on May 3 that rate hikes were unpopular in a low-growth economy but said the priority was managing inflation expectations. Annual consumer price inflation is running at over 7%, above the central bank’s target range of 3%-6%. “We want to ensure that the depreciated exchange rate and food prices don’t permeate into other parts of the inflation basket,” Cassim said.

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