S Africa on a tightrope as key rate rises to five-year high
Michael Bleby | Wednesday, 25 June 2008
SOUTH Africa's central bank has raised its benchmark interest rate by 50 basis points to a five-year high of 12 per cent, in an attempt to prevent rising food and oil prices spilling into wage increases and other areas of its economy.
The increase, which brings the total rise to 5.0 percentage points since the current round of tightening began in June 2006, is unlikely to be the last.
The Reserve Bank is battling to bring consumer inflation, which measured 10.4 per cent in April, back to its 3.0-6.0 per cent target range.
Explaining the latest lower than expected increase -- most economists had forecast a 1.0 percentage point rise -- the bank's governor said there were signs that previous increases were starting to take effect, citing slower growth in household expenditure and commercial bank lending.
"The economy is responding to a less accommodative monetary policy stance," Tito Mboweni said.
The decision highlights the tightrope the central bank is trying to walk between curbing inflation and avoiding financial distress for the nation's growing black middle class -- much of which has access to credit for the first time.
Between 2000 and 2005 the number of black South Africans earning a monthly salary between R4,000 and R12,000 ($1,600, euro1,030,
The increase, which brings the total rise to 5.0 percentage points since the current round of tightening began in June 2006, is unlikely to be the last.
The Reserve Bank is battling to bring consumer inflation, which measured 10.4 per cent in April, back to its 3.0-6.0 per cent target range.
Explaining the latest lower than expected increase -- most economists had forecast a 1.0 percentage point rise -- the bank's governor said there were signs that previous increases were starting to take effect, citing slower growth in household expenditure and commercial bank lending.
"The economy is responding to a less accommodative monetary policy stance," Tito Mboweni said.
The decision highlights the tightrope the central bank is trying to walk between curbing inflation and avoiding financial distress for the nation's growing black middle class -- much of which has access to credit for the first time.
Between 2000 and 2005 the number of black South Africans earning a monthly salary between R4,000 and R12,000 ($1,600, euro1,030,