South Africa raises interest rates as inflation spikes

Johannesburg, South Africa, Jan 27 – South Africa’s central bank on Thursday raised its benchmark interest rate by a quarter-point in a bid to rein in inflation.

The Reserve Bank had slashed its benchmark rate to a record low of 3.5 percent in July 2020, to soften the pandemic’s economic blow.

But as inflation has ticked upward, the bank raised the rate by 0.25 points in November and Thursday added a further quarter point to 4.0 percent.

Inflation in December came in higher than expected at 5.9 percent, at the high end of the bank’s 3-6 percent target, driven by rising fuel and electricity prices.

Reserve Bank Governor Lesetja Kganyago said inflationary pressure was expected to continue.

He said “a gradual rise in the repo rate will be sufficient to keep inflation expectations well anchored and moderate the future path of interest rates.”

Record-high unemployment of 34.9 percent has added to pressure on South Africa’s government to revive the economy.

The Reserve Bank forecast economic growth of 1.7 percent this year.