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South Africa interest rate rise: When will SARB hike rates again?

By Fitri Wulandari

Edited by Georgy Istigechev

16:36, 19 October 2022

Obverse of set of South African ZAR banknotes, with diverse denominations
The RSA’s central bank has hiked its benchmark interest rate by 275 basis points since November last year – Photo: D Busquets /

The South African Reserve Bank (SARB) has maintained its hawkish monetary policy stance to combat stubbornly high inflation despite the country’s economic growth starting to falter.

Since it kicked off its tightening cycle in November 2021, South Africa’s central bank has raised its repo rate by a total 275 basis points (bps), bringing the rate to 6.25% in September.

On the other hand, the country’s GDP growth has continued to slow amid high interest rates and external economic headwinds.

Analysts and the South African Reserve Bank (SARB) have cut their outlook for South Africa’s economic growth for this year and beyond. Will the risks of slowing economic growth encourage SARB to take pause on the rate hike?

What is the South African Reserve Bank (SARB)?

The South African Reserve Bank (SARB) was established as South Africa’s central bank in 1921, making it the oldest such institution on the African continent.

SARB's initial mandate was to restore and maintain order in the issue and circulation of domestic currency, as well as to return the gold standard to its pre-World War I rate of exchange.

The bank’s mandate had gone through several changes, but it was not until 1990 that it accepted a formal mission statement. It mandated the bank to protect the internal and external value of the rand, South Africa’s national currency.

In 2000, South Africa adopted an inflation-targeting monetary policy framework, with a goal to keep consumer inflation rate in a band between 3% and 6%.

Between 1998 and 2022, the repo rate – the cost for banks to borrow reserves from the SARB for one week – was the bank's main monetary policy tool. In 2022, the SARB changed its framework for implementing monetary policy. The key policy rate became the rate banks earn for depositing qualifying funds at the SARB overnight. The new framework is referred to as a tiered-floor system

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South African interest rate history

From July 2020 to November 2021, the SARB maintained its policy rate at 3.50% to support the country’s economy during the Covid-19 pandemic. The central bank had four rate cuts in the first half of 2020, lowering the rate from 5.25% in March to 3.50% in July 2020.

The SARB began its tightening cycle on 18 November 2021, raising the policy rate to 3.75%. In its two meetings in January and March, the bank adopted a less aggressive approach, meaning South Africa’s interest rate rise was smaller as the bank opted for hikes of 25bps each, which lifted the rate to 4.25% by March 2022.

The annual Consumer Price Index (CPI) in South Africa rose to 5.9% in December 2021 – the highest annual increase since March 2017, according to Statistics South Africa. The pace of price increases slowed to 5.7% in February, but rising food and fuel prices started to add upward pressure on monthly CPI inflation.

The bank then began to ramp up its hikes, raising the interest rate by 50bps in May 2022 and increasing the policy rate to 4.75% as the inflation rate remained near SARB’s upper target of 6%. Soaring commodities and energy prices due to the war in Ukraine had spilled over to domestic prices.

In the two consecutive meetings in July and September, the SARB raised the policy rate by 75bps each time, lifting the rate to 6.25% in September as inflation soared to 13-year highs.

The rand’s depreciation against the US dollar also added upward pressure on inflation.

The US dollar has strengthened against other currencies due to aggressive monetary tightening by the US Federal Reserve (Fed), with investors piling into the safe-haven currency.

As of 18 October, the US dollar to South African rand currency pair (USD/ZAR) traded at 18.11, gaining 24% in one year due to the USD’s rise, according to data from economic data provider TradingEconomics.


Annual inflation in South Africa in August eased to 7.6% from a 13-year high of 7.8% in July, aided by declining fuel prices in line with falling global crude oil prices. However, inflation remained above SARB’s target.

Inflation rate seen elevated until 2024

The SARB increased its inflation rate forecast to average 6.5% in 2022 and to remain above the midpoint of the target range of 3%-6% into 2022.

The bank revised headline inflation for 2023 to 5.3% in September from a previous forecast of 5.7%, as it expected fuel and food prices to decline next year. Inflation was projected to fall to 4.6% in 2024.


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Fitch Ratings forecast South Africa’s headline inflation to remain above SARB’s target range until late 2023. The global ratings firm expected headline inflation to average 7.2% in 2022, before cooling to 5.6% in 2023 and 4.5% in 2024.

The firm wrote in its outlook on 11 September:

“Weakness in the rand and still-high shipping rates are keeping local prices for imported commodities elevated. Core inflation has also continued to increase, though it remains within the SARB’s target range.”

The World Bank forecast South Africa’s inflation to average 6.8% in 2022, dropping to SARB’s band of 5.7% in 2023 and settling just above the midpoint of the target range in 2024.

The World Bank’s October 2022 Africa’s Pulse report read:

“Aggressive monetary policy, the decline in commodity prices, and weakness in the domestic demand will drag down inflation over the forecasting period.”

High rates to slow economic growth

In September, the SARB lowered its growth forecast for the country’s economy to 1.9% from the previous forecast of 2%. Flooding in the Kwa-Zulu Natal in April and more extensive load-shedding contributed to a contraction of 0.7% in the second quarter.

The bank expected growth in the third and fourth quarters to be 0.4% and 0.3%, respectively. It projected the country’s GBP growth to rebound to 1.4% in 2023 and by 1.7% in 2024. The country’s economy grew by 4.9% in 2021, according to the RSA’s official statistics agency.

In recent South Africa interest rate news, the World Bank warned that high interest rates may cap the country’s growth prospects. It expected South Africa’s economic growth to slow to 1.4% in 2023, from estimated 1.9% in 2022 and rebound to 1.8% in 2024.

“However, contractionary monetary policy to maintain parity with the South African rand and to fight rising inflation may drag down growth. The twin deficits recorded last year will persist in 2022,” the World Bank wrote.

“This weak performance is insufficient for the country to address the socio-economic problems of high unemployment and rising inequality.”

South African interest rate outlook 2022 and beyond

As South Africa’s inflation rate is expected to remain high, if not rising above the SARB target, will the bank raise its policy rates again or take a pause?

In its Global Economic Outlook on 11 September, Fitch revised up its SARB interest rate forecast and expected further tightening of monetary policy in 2023:

“The central bank is concerned that rising inflation expectations may feed into high wage settlements, which currently exceed the headline inflation rate. As such, the central bank is less focused on recent economic weakness.”

The firm projected the interest rate in South Africa to reach 6.5% by the end of 2022, an upward revision from 5.75% in June’s forecast. It forecast South Africa interest rates to increase to 7% in 2023, before reducing it to 6.25% in 2024.

South Africa’s interest rate was forecast to reach 6.50% by the end of the final quarter of 2022, according to Trading Economics projections. The RSA interest rate was expected to be raised to 6.75% in 2023, before cutting the rate to 6% in 2024, the service added.

Economic forecasting service Focus Economics expected SARB to lift the repo rate to 6.37% in 2022, rising to 6.63% in 2023.

The bottom line

TradingEconomics and Fitch suggested SA interest rates would be increased until 2023 to cool rising inflation.

Remember that analysts' predictions on South African interest rates can be wrong, and have been inaccurate in the past.

You should always conduct your own research before trading, looking at the latest news on South Africa’s economy, as well as technical and fundamental analysis and a wide range of analyst commentary.  

Note that past performance does not guarantee future returns. And never trade money that you cannot afford to lose.


Are interest rates going up in South Africa?

TradingEconomics and Fitch Ratings both expected the SARB to continue increasing the country’s benchmark interest rate until 2023 to as high as 6.75% to 7%, before lowering it to 60%-6.25% in 2024.

Remember that analysts and algorithm-based forecasting websites can and do get their forecasts wrong. Always do your own due diligence before making investment decisions. And never invest or trade money that you cannot afford to lose.

Which bank in SA has the best interest rates?

According to Rate Compare, SA Retail Bonds has the best fixed deposit interest rate at nominal rate of 11.25% and effective rate of 11.57%. Access Bank Plc ranks second with 10.85% and 11.41% for nominal and effective rates respectively.

Why are interest rates going up in South Africa?

South Africa interest rates have been going up to fight soaring inflation which has gone above the country’s central bank’s target.

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You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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