South Africa joins in with emerging-market rate hikes

|By:, SA News Editor

The South African Reserve Bank has unexpectedly raised interest rates by 50 bps, with the key repurchase rate rising to 5.5% and the prime lending rate to 9%.

The consensus was that the bank wouldn't increase rates, but the weakness of the rand has prompted it to act.

The bank's move follows similar action of varying degrees from peers in other emerging markets, most notably Turkey yesterday, India and Brazil.

"The bunch of rate hikes from other emerging-market economies has put pressure on (Governor Gill) Marcus to hike rates because there's a fear she's going to be left behind if she doesn't move and foreign money will then invest in other emerging market economies," says trader Sijadu Mzozoyana. (PR)

However, the bank's move seems to be having no effect on the rand, with the USD-ZAR +2.5 to 11.2988 rand. The FTSE/JSE Top 40 is +0.4%.