South African rand falls as rate hike, higher inflation cloud outlook

By Reuters News

JOHANNESBURG, Sept 23 (Reuters) - The South African rand fell on Wednesday after the central bank raised its key interest rate, saying the move was needed to steer inflation back toward its 3% target, while data showed headline inflation edged higher in August.

  • At 1428 GMT, the rand traded at 16.3975 against the dollar , down about 1.3% from its previous close.

  • The South African Reserve Bank raised its key interest rate ZAREPO=ECI by 25 basis points to 7.25%.

  • SARB Governor Lesetja Kganyago said it was crucial that inflation reverts to the central bank's 3% target as the latest fuel price pressure fades.

  • FNB chief economist Mamello Matikinca-Ngwenya said rising oil prices and tighter global financial conditions have heightened the risk of imported inflation feeding into broader pricing dynamics, particularly through higher fuel costs and currency depreciation.

  • As a net fuel importer, South Africa is heavily exposed to swings in global energy prices.

  • Data from Statistics South Africa showed headline inflation edged up to 4.4% year on year in August ZACPIY=ECI.

  • On the Johannesburg Stock Exchange, the Top-40 index .JTOPI closed down 1.7%.

  • South Africa's benchmark 2035 government bond was weaker, as the yield rose 13.5 basis points to 8.72%.

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