3Q CENTRAL BANKING: South Africa Expected to Move Interest Rates Higher

 
   By Patrick McGroarty 
 

        South African Central Bank Governor Lesetja Kganyago looks likely to seize a slight rise in inflation to justify a rate increase he has wanted to make since taking office last year.
        Mr. Kganyago has said the bank needs to raise rates off three-decade lows to protect South Africa's fragile economy and the rand currency from another exodus of international capital after the Fed's expected rate rise later this year.
        But since he succeeded former Governor Gill Marcus in November, he hasn't been able to raise the bank's key rate above its current 5.75% level because inflation and growth have both slowed. The economy expanded just 1.3% in the first quarter and unemployment rose to an 11-year high.
        Growth and the employment outlook aren't improving. Power outages and contentious wage talks between gold mining companies and their workers' unions are expected to weigh heavily on the economy for the rest of this year.
        But inflation is rising, just in time for the bank to act ahead of the Fed's long-awaited rate increase. South Africa's annual inflation rate has been ticking upward, to 4.6% in May from 3.9% in February.
        That trend has led most economists to assume that the bank will raise its key interest rate by a quarter-percentage point to 6% in July, followed by perhaps another quarter-point increase later this year.
        --Write to Patrick McGroarty at patrick.mcgroarty@wsj.com
        (END) Dow Jones Newswires

        July 08, 2015 05:59 ET (09:59 GMT)

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