The South African rand gained ground on Thursday afternoon after the central bank increased its key interest rate and new data revealed a significant acceleration in producer inflation during April.
At 1410 GMT, the rand was trading at 16.32 against the dollar, representing a 0.3% increase from Wednesday’s close.
The South African Reserve Bank raised the policy rate by 25 basis points to 7%, marking its first increase in three years. The move positions South Africa among the limited number of emerging markets that have tightened monetary policy during the Iran war.
The central bank stated the rate increase was necessary to return inflation to target levels following a sharp acceleration in April. Consumer inflation reached 4% in annual terms last month, exceeding the bank’s 3% target.
Data released on Thursday showed producer inflation also accelerated substantially last month, climbing to 4.8% year-on-year from 2.3% in March.
