South Africa raises rate first time since 2016

Bloomberg

The South African Reserve Bank increased its benchmark interest rate for the first time in more than two years as it sees inflation risks remaining elevated.
The Monetary Policy Committee voted to raise the benchmark repurchase rate to 6.75 percent from 6.5 percent. Of the six panel members, half preferred the increase and the rest favored an unchanged stance, Governor Lesetja Kganyago told reporters in the capital, Pretoria.
Delaying the adjustment could cause inflation expectations to become entrenched at higher levels, which would require even stronger monetary response in future and the MPC still sees its stance as accommodative. “The three-three split sends a more dovish outlook for the policy-rate traj-
ectory,” Jeffrey Schultz, an economist at BNP Paribas South Africa, said by phone. “This is a Reserve Bank that’s being prudent and proactive in mitigating inflation risks.”
The central bank has had to balance its goal of anchoring price growth close to the 4.5 percent mid-point of its target with the needs of a shrinking economy. While the rand’s recent gains and the plunge in the oil price trimmed inflation expectations, the MPC forecasts price growth will stay well above 5 percent in the next two years and its quarterly projection model shows four more rate increases of 25 basis points each by the end of 2020.