South African central bank hikes rate again to tame prices

South Africa’s central bank on Thursday raised its benchmark interest rate by a hefty 0.75 percentage points again as it battles to control inflation.

The move follows new rate hikes by the US Federal Reserve and central banks in Europe this week as countries scramble to tame galloping consumer prices.

The South African central bank’s decision mirrors a similar 0.75-point hike in July that was the highest in a decade, brings the rate to 6.25 percent, close to its pre-Covid pandemic level.

“Economic and financial conditions are expected to remain more volatile for the foreseeable future,” central bank governor Lesetja Kganyago said.

The bank has now raised its rate five straight times.

Inflation slowed slightly to 7.6 percent in August after hitting a 13-year record high of 7.8 percent a month earlier.

Inflation began to rise worldwide as countries emerged from Covid pandemic lockdowns and it shot higher after Russia’s war in Ukraine sent global energy and food prices soaring.

The South African central bank forecast the country’s economy would grow by 1.9 percent this year, lower than its previous forecast of two percent.

After growing in the first three months of the year, the economy shrank in the second quarter due to devastating floods and extensive national power blackouts.