South Africa: Central Bank raises benchmark interest rate to 7.25%

The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) unanimously raised its benchmark interest rate by 25 basis points to 7.25%, effective September 25, announced Governor Lesetja Kganyago, according to SAnews.gov.za. Inflation currently stands at 4.4%, with long-term expectations close to 4% according to the latest Bureau for Economic Research survey. Kganyago justified the decision by the resurgence of the oil shock and rising global rates: "A few months ago, the fuel price shock seemed to be easing, but it has intensified since." Food inflation has dropped to its lowest level since 2010, driven by good harvests and the stabilization of meat prices following the foot-and-mouth disease outbreak. Annual growth is revised downward to 1.2%, compared to 1.4% previously, despite a contraction in the second quarter. The SARB's Quarterly Projection Model (QPM) anticipates a return of inflation to 3% towards the end of 2027, with upcoming rate cuts if this scenario materializes. The SARB tested a double global hike scenario (1 percentage point) that would trigger a depreciation of the rand and require a more restrictive response, as well as a wage drift scenario requiring one to two additional hikes. Sankofa Marker — The SARB sets its own benchmark rate to defend its own currency, the rand, without external pegging: this is the concrete exercise of...