The repurchase rate (repo rate) in South Africa reached 7.25% after the SA Reserve Bank's (SARB) Monetary Policy Committee (MPC) agreed to a 25 basis points hike.

The increase means that the repo rate will now be 7.25% per year from 27 January 2023, with prime now at 10.75%.

SARB Governor Lesetja Kganyago made the announcement on Thursday during a press briefing.

Addressing the media, the Governor said three members of the MPC preferred the announced increase.

"Two members preferred a 50% basis points increase," he said.

The MPC made the decision during its meeting on Wednesday. This was the seventh consecutive increment. The repo rate was hiked by 50 basis points at the May meeting. In July and September, the MPC upped the ante, announcing 75 basis point rises.

He said: "The revised repurchase rate remains supportive of credit demand in the near term, while raising rates to levels more consistent with the current view of inflation and risks to it. The aim of policy is to anchor inflation expectations more firmly around the midpoint of the target band and to increase confidence of attaining the inflation target sustainably over time".

Kganyago said central bank's forecast of headline inflation for 2023 is unchanged at 5.4% and is slightly higher at 4.8% for 2024.

"In 2025 we still expect headline inflation of 4.5%," he said. "Our forecast for core inflation is somewhat lower at 5.2% in 2023 (down from 5.5%) and 4.7% in 2024 (down from 4.8%)."

He said domestic food price inflation continues to increase.

"Load-shedding may have broader price effects on the cost of doing business and the cost of living," he said.

For 2023, and as a result of extensive load-shedding and other logistical constraints, the Bank now forecasts GDP growth of only 0.3%.