South Africa’s central bank raised its benchmark interest rate for the first time in three years, in effect blunting a $1 billion fuel relief package designed to soften the blow of surging oil prices.
The move positions South Africa at the vanguard of a small group of emerging markets hiking rates to cushion the impact of the Iran war upending global supply chains.
Policymakers voted 4-2 to lift the repo rate by 25 basis points to 7%, with Governor Lesetja Kganyago telling reporters in Pretoria that the bank was prioritizing its newly codified 3% inflation target over a fragile domestic recovery. Ghana, Kenya, and Nigeria — like South Africa — had been easing monetary policy before the conflict broke out, but chose to hold their lending rates steady in recent weeks.
The South African central bank’s widely expected decision potentially sets up friction with politicians who want to show voters set to go to the polls in November’s local elections that they are easing the cost of living — a goal they thought they achieved last month when they rolled out a $1 billion tax cut at fuel pumps.
