South Africa central bank hikes repo rate to 7.00%

South Africa’s central bank raised its benchmark interest rate for the first time in three years on Thursday, moving to contain inflation pressures driven by a surge in global oil prices linked to conflict in the Middle East.

The South African Reserve Bank’s Monetary Policy Committee increased the repo rate by 25 basis points to 7.00%, a decision supported by four of its six members, with two preferring to hold rates steady. The prime lending rate will rise to 10.5%. The hike, effective May 29, ends a cycle of monetary easing that had brought the rate down from a peak in 2023.

Governor Lesetja Kganyago said the committee acted because inflation risks had intensified. Consumer price inflation accelerated to 4.0% in April from 3.1% in March, primarily due to higher energy costs. Fuel prices jumped 11.4% in April after a sharp decline the previous month. The bank now forecasts headline inflation to average 4.4% this year and 3.7% in 2027, before returning to its 3% target in 2028.

Kganyago cited the prolonged closure of the Strait of Hormuz, a critical oil shipping route, as a key factor, noting that oil prices have fluctuated around $100 per barrel. He warned that large and...