PRETORIA - South Africa's central bank raised its key repo rate (equivalent to NZ's Official Cash Rate, or OCR) by 50 basis points to 10 per cent this morning (NZT) to tame inflation, in line with expectations and despite global market turmoil.
Reserve Bank Deputy Governor Xolile Gumasaid at a televised news conference the bank had noted the market turbulence but said its focus was to return the targeted inflation rate to within the 3 to 6 per cent band.
"The most recent central forecast of the bank indicates a slight deterioration in the inflation outlook, particularly in the short term, when compared to the previous forecast," he said.
South Africa's targeted CPIX inflation breached the top end of the bank's 3 to 6 per cent target for the third consecutive month in June, at 6.4 per cent year-on-year.
Guma said the gauge was only forecast to come back within the band in the second quarter of 2008, declining to 5.1 per cent by the end of 2009.
The half percentage point rise is the second this year and follows four increases during the second half of 2006 to tame rising inflation and high consumer spending.
The rand currency has lost about 9 per cent of its value against the dollar since hitting an 11 month high of 6.795 last month, while local stocks have skidded, following world markets lower.
The unit initially firmed to 7.7240 against the greenback after the rates announcement from 7.4550.
All 16 economists polled by Reuters last week forecast the half percentage point hike, although at least one had since predicted it would keep rates on hold because of falling global stocks, sparked by credit concerns.
