The South Africa Reserve Bank unexpectedly increased its benchmark interest rate, following central banks in emerging markets from Turkey to Brazil that have tightened monetary policy to bolster their currencies.
The Monetary Policy Committee lifted the repurchase rate to 5.5 percent from 5 percent, Governor Gill Marcus told reporters in Pretoria today. It was the first increase since June 2008.
All 25 economists surveyed by Bloomberg last week predicted the rate will stay unchanged as the central bank focuses on supporting an economy that’s been buffeted by slower global demand and mining strikes. Those concerns are being overtaken by a weaker rand that’s fueling inflation and threatening the bank’s 3 percent to 6 percent target. Turkey raised borrowing costs after a late-night emergency meeting, whileIndia unexpectedly increased its key rate yesterday.
“Like these countries, South Africa has lived beyond its means over the past few years and a weaker currency and higher interest rates are necessary for a rebalancing of the economy,” Theuns de Wet, head of global markets research at FirstRand Ltd.’s Rand Merchant Bank unit, said in a note to clients before the rate decision.
Inflation accelerated in December for the first time in four months to 5.4 percent. The rand has plunged 24 percent against the dollar since the beginning of last year and was trading as low as 11:0543 in Johannesburg today.
Source: Bloomberg
