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South Africa's central bank raises interest rates to 14-year high

Published 05/25/2023, 11:04 AM
© Reuters.

Investing.com -- The South African Reserve Bank (SARB) has raised its repurchase rate by 50 basis points to 8.25%, the highest level in 14 years, as the central bank looks to corral persistent inflation. 

SARB Governor Lesetja Kganyago cited elevated inflation expectations as a key factor driving the decision to raise interest rates. Despite early signs of easing inflation globally, South Africa faces stubbornly high price pressures following a string of blackouts that have left many businesses reliant on more costly diesel generators.

The SARB now sees inflation this year touching an average of 6.2%, up from its prior forecast of 6.0%. The updated estimates come despite recent data showing that inflation dropped by more-than-anticipated to 6.8% in April.

The central bank added that headline inflation is now projected to remain above the upper end of its 3% to 6% target range until the third quarter of 2023.

It also pushed back the timeline for inflation to "sustainably revert" back to the mid-point of that band to the second quarter of 2025, instead of its prior forecast for the final quarter of 2024.

The rand touched a fresh low against the dollar in the wake of the announcement, slumping by more than 2%. According to Reuters, traders had expected a larger, 75 basis point hike.

This article was produced with assistance from artificial intelligence.

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