To contain inflation, South Africa’s central bank shocked the markets on Thursday by increasing its primary lending rate (ZAREPO=ECI) by more than the anticipated 50 basis points to 7.75%.
The rate increase was double what the majority of analysts surveyed by Reuters (25 basis points) had predicted. The rand experienced a jump as a result, extending earlier advances to gain close to 2% against the dollar.
The repo rate has now increased nine times in a row, totaling 425 bps since the South African Reserve Bank started tightening policy in November 2021.
According to figures released last week, February consumer inflation in South Africa increased slightly from 6.9% in January to 7.0% year over year, suggesting that widespread rolling power outages may be putting upward pressure on prices.
Three members of the Monetary Policy Committee, which consists of five people, preferred a rate rise of 50 basis points, while two others preferred a rate increase of 25 basis points.