(Reuters) -South Africa’s rand gained against the dollar on Thursday after the central bank hiked its main lending rate by 75 basis points to 5.50%, its biggest rise in nearly two decades, to tame soaring inflation.
At 1540 GMT, the rand traded at 17.0575 against the dollar, 0.55% stronger than its previous close.
This was the fifth meeting in a row that the South African Reserve Bank’s monetary policy committee (MPC) has raised its repurchase rate, a steeper hike than analysts polled by Reuters had predicted.
A Reuters poll published last week predicted a 50 basis points (bps) increase.
“The aim of policy is to stabilise inflation expectations more firmly around the mid-point of the target band and to increase confidence of hitting the inflation target in 2024,” central bank governor Lesetja Kganyago told a news conference.
The SARB has now hiked rates by a cumulative 200 bps since November last year in a bid to tame price pressures.
Data on Wednesday showed June inflation rose to a 13-year high of 7.4% year on year, from a reading of 6.5% in May, and well above from the bank’s 3%-6% range.
“Another 75 bp hike remains our base case for September… but its latest communication, we believe, clearly opens the door for a larger 100 bp hike at (the SARB’s) next scheduled meeting should CPI continue to surprise to the upside,” Jeff Schultz, senior economist at BNP Paribas South Africa, said in a research note.
Stocks on the Johannesburg Stock Exchange (JSE) closed slightly higher, helped in part by banking companies benefiting from the central bank decision.
The benchmark all-share index closed 0.38% higher at 67,907 points, while the blue-chip index of top 40 companies ended up 0.44% at 61,647 points.
The government’s benchmark 2030 bond soared, with the yield down 20 bps at 10.750%.
(Reporting by Anait Miridzhanian in Gdansk and Bhargav Acharya in Bengaluru; Editing by Kirsten Donovan and David Evans)
