JOHANNESBURG- The South African Reserve Bank (SARB) raised its main lending rate on Thursday in an expected move to fight rising inflation, the second consecutive hike after slashing rates during the COVID-19 pandemic.

The decision to increase its repo rate by 25 basis points to 4.00% was split 4-1 between members of the Monetary Policy Committee, with four preferring a 25 basis point hike and one preferring no change in rates.

SARB Governor Lesetja Kganyago told a news conference the committee did not discuss a larger hike than 25 basis points.

The rand ZAR=D3 pared gains after the decision was announced to trade broadly flat on the day.

The government's benchmark 2030 bond gained, with the yield falling 8.5 basis points to 9.370% by 1420 GMT from 9.455% before the decision.

The case for a rate hike grew last week when December inflation data came in higher than expected at 5.9% year on year, close to the top of the bank's 3%-6% target range. 

Kganyago said the bank's forecasts did not suggest inflation would breach 6%.

The SARB stressed inflation risks from food, fuel and electricity. Another risk it cited was that global interest rates would rise faster than currently forecast.

Thursday's rate hike follows a similar increase at the SARB's last policy meeting in November, when it raised rates for the first time in three years.

"The decisions we have taken from November and now we believe are decisions that are measured, will take care of the emerging inflation risks whilst at the same time continuing to provide support to households and firms," Kganyago said.

"The committee believes a gradual rise in the repo rate will be sufficient to keep inflation expectations well anchored and moderate the future path of interest rates," he added.

The bank now forecasts headline consumer inflation will average 4.9% this year, up from 4.3% in November. It kept its 2022 gross domestic product growth prediction unchanged at 1.7%.

(Additional reporting by Vuyani Ndaba Editing by James Macharia Chege) ((; +27 10 346 1076))