Reserve Bank governor Lesetja Kganyago says half-point South Africa rate hike possible in July

TRADERS tempered expectations for the largest South African increase in borrowing costs in almost two decades after the head of the nation’s central bank said it may consider raising interest rates by only half a percentage point in July.

Annual inflation that surged above the Reserve Bank’s target range for the first time in more than five years in May had moved traders to price in at least one 75-basis-point increase this year.

A three-quarter percentage point hike would be the biggest since September 2002, when the bank lifted the benchmark rate by 100 basis points.
Before the price shock, the implied policy rate path of its quarterly projection model, which the monetary policy committee uses as a guide, indicated the key rate will be at 5.3% by year-end.

While the central bank’s baseline scenario for increases of 25 basis points at each of its next three meetings remains, the