The South African Reserve Bank (SARB) raised its main lending rate on Thursday in a "measured" move it said should tame inflation risks, the second consecutive hike after slashing rates early in 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 (MPC), 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 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."

The rand erased gains after the decision, which was in line with economists' expectations, to trade more than 0.1% weaker at 15.3600 to the dollar by 1510 GMT. But the government's benchmark 2030 bond strengthened, with the yield falling 12 basis points to 9.335% from 9.455% before the decision.

'DOVISH HIKE'

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%.

Razia Khan, chief economist for Africa and the Middle East at Standard Chartered, said the SARB could raise rates again at meetings in March and May as inflation was likely to be elevated in the near term. But she predicted a pause after that, followed by a resumption in hikes towards year-end.

In its MPC statement, the SARB pointed to inflation risks from food, fuel and electricity.

Another risk it cited was that global interest rates would rise faster than currently forecast.

Thursday's hike - which Khan called "relatively dovish" - comes after a similar increase at the SARB's November policy meeting, when it raised rates for the first time in three years.

The central bank of Africa's most industrialised economy now forecasts consumer inflation will average 4.9% this year, up from a 4.3% forecast in November. It maintained its 2022 gross domestic product growth prediction of 1.7%.