The repo rate will increase by 25 basis points to 3.75%, South African Reserve Bank (SARB) governor Lesetja Kganyago announced on Thursday.
This means that the prime lending rate of commercial banks will increase to 7.25%.
The move to hike the rate comes amid increasing concerns around higher inflation and follows the conclusion of the SARB's last Monetary Policy Committee (MPC) meeting of the year.
It was arguably the most anticipated repo rate decision of the year, with economists and market watchers split on whether the Sarb would hold or increase the repo rate ahead of the decision.
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