The South African central bank’s move to raise borrowing costs Thursday signals the end of record-low interest rates in some of its neighbours.
Monetary policy committees in Namibia, Lesotho and Eswatini could follow suit after South Africa’s rate-setting panel raised its benchmark rate to 3.75% from 3.5%, unwinding some of the 300 basis points of policy easing announced last year. The decision should leave domestic markets less vulnerable to the prospect of more aggressive US Federal Reserve tapering.
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Those countries’ policy makers will likely seek to safeguard their currency pegs with South Africa’s rand and ensure their economies don’t miss out on foreign investors seeking higher yields when they deliberate in coming weeks.
The group forms part of a common monetary area with South Africa, with the rand legal tender and monetary policy and foreign-exchange rules often guided by the actions of the Reserve Bank.
Other central banks in the region — Mozambique, Zambia, Zimbabwe and Angola — had already raised rates this year. Botswana, Malawi and Mauritius have kept their’s steady, while the Democratic Republic of Congo cut.