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South Africa Raises Key Rate, Inflation Expectation

FILE: South Africa's central bank governor, Lesetja Kganyago, delivers a keynote address on monetary policy, growth and jobs at the University of the Witwatersrand in Johannesburg, South Africa, on November 1, 2022.

JOHANNESBURG - South Africa's central bank raised its main interest rate on Thursday as it also revised up its inflation forecasts.

The South Africa Reserve Bank raised its benchmark rate by 0.5 percentage points to 8.25 percent, in what it said was a unanimous decision of its monetary policy committee, the 10th consecutive hike.

Governor Lesetja Kganyago said the policy aimed at increasing confidence that inflation could be reined in "sustainably over time."

South African monetary policymakers started raising rates in November 2021 and sprang their steepest hike in a decade - 0.75 percentage points - in July last year.

While the key rate went up, inflation dropped to the lowest level in almost a year in April, slowing to 6.8 percent from 7.1 percent in March.

Yet, food prices remain obstinately high, having experienced record increases over the past 12 months.

On Thursday, the central bank said it expected inflation to average at 6.2 percent this year, up 0.2 percentage points on earlier forecasts.

"With core goods and food higher in the near term, headline inflation for 2023 is revised up," Kganyago said in a statement.

"Headline inflation for 2024 also increases to 5.1 percent," he added.