The South Africa Reserve Bank unexpectedly increased its benchmark interest rate, following central banks in emerging markets from Turkey to Brazil that 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 Wednesday. 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, while India unexpectedly increased its key rate on Tuesday.
“They have got to maintain credibility,” John Loos, an economist at First National Bank, a unit of FirstRand Ltd., said in a phone interview from Johannesburg. “They do have an inflation target. They have been accommodative of growth in recent years but you can’t really ignore what is now a massive rand depreciation and the potential inflation impact.”
The move didn’t help to support the rand, which fell 1.8 percent to 11.2425 against the dollar as of 3:36 p.m. in Johannesburg on Wednesday, extending its slide this year to 6.8 percent.
