South Africa’s central bank raised rates to the highest level in 14 years to rein in inflation expectations in an economy that’s expected to barely grow this year. The rand fell to a record low as Governor Lesetja Kganyago warned that further currency weakness is likely.
The monetary policy committee raised the benchmark interest rate to 8.25% from 7.75%, Kganyago said at a briefing north of Johannesburg on Thursday. The move was predicted by 21 of 25 economists in a Bloomberg survey.
The tightening brings the rate to its highest level since 2009. It was necessitated by recent rand weakness that led the central bank to raise its forecast for inflation to 6.2% for this year and 5.1% in 2024. Its estimates for core inflation, which excludes the cost of food, non-alcoholic drinks, fuel and electricity, were raised to 5.3% and 5% for this year and next. The bank’s inflation target is 3% to 6%.