JOHANNESBURG – Citibank economist Gina Schoeman said that it was no surprise that the South African Reserve Bank opted to increase the repo rate by 75 basis points to 6.25%.
The central bank’s decision comes in a bid to curb runaway inflation.
Higher food and fuel prices are among some of the drivers of high inflation.
Despite a slight decrease to 7.6% in August, the reserve bank remains concerned that inflation is not yet under control.
Economist Gina Schoeman said that while inflation remained a major concern, the reserve bank would also need to keep a close watch on the currency.
Schoeman believes a weaker rand will place a bigger demand on the central bank to tighten its controls.
Domestic factors that are likely to impact the currency include the dreaded power cuts.
The country is currently between stage 5 and 6 load shedding, denting investor confidence substantially.
Schoeman said that the upcoming African National Congress (ANC) elective conference in December was also likely to influence the currency.
“The reason I bring in the currency is that this is where it all lands,” Schoeman said.
Schoeman added that interest rates were unlikely to fall anytime soon.