Small business owners will have to tighten their belts as the Reserve Bank has hiked the repo rate by 50 basis points to 5.5%. In addition, a steep petrol price increase is forecast for February.
Gill Marcus, governor of the Reserve Bank, announced the first increase in five-and-a-half years on concerns that the inflation outlook had deteriorated dramatically with the rand weakening.
Market expectation was for the repo rate to remain unchanged.
Marcus said inflation was expected to breach the upper end of the target range (3%-6%) in the second quarter of 2014, reaching a peak of 6.6% in the fourth quarter.