The SARB has lagged some other emerging market central banks, such as Russia and Brazil, in raising rates because domestic inflation has risen more modestly.
The central bank slashed its repo rate by 300 basis points last year to a record low to keep the coronavirus-ravaged economy afloat. But annual inflation has accelerated from January's 3.2% before stabilising at 5.0% in September and October, above the midpoint of the bank's 3%-6% target range. Global producer and food inflation, oil prices and domestic electricity prices were among the main inflation risks cited by the SARB on Thursday.
The central bank revised slightly higher its headline consumer price inflation estimate for 2021 to 4.5% from 4.4%. The forecast for core inflation, which strips out food and energy prices, was unchanged at 3.0% this year.The rand briefly extended losses after the rate hike was announced, before recovering ground later on. Some traders had priced in a more aggressive rate trajectory than the gradual path laid out by the MPC, analysts said.
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SA raises main lending rate for first time in 3 yearsSA's central bank raised its main lending rate by 25 basis points to 3.75% in a close call on Thursday, the first rate hike in three years in response to growing inflation risks.
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