The South African Reserve Bank has increased interest rates by 50 basis points to 6.75 per cent and increased the prime rate to 10.25.
"Given the deterioration in the inflation outlook, the MPC decided to increase the repurchase rate by 50 basis points to 6,75 per cent per annum, effective from 29 January 2016," said Govenor of the South African Reserve Bank Lesetja Kganyago.
Kganyago also relayed that food prices would peak at 11 per cent in the fourth quarter of the year and that the continuing drought means there will not be a reprieve for the agricultural sector anytime soon.
"The surge in agricultural commodity prices since early 2015 is beginning to impact on consumer food price inflation, and these pressures are likely to increase in the light of the persistent drought and the weaker exchange rate," the govenor said.
The statement also addressed how the global growth outlook has deteriorated and that chances of a slowdown in the US have increased.
Financing of the current account will remain difficult in current economic situations Govenor Kganyago said.
Petrol prices will also hike by 7 cents in February 2016.