South Africa raises lending rate to 6.75 percent in tight call

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Governor of the Bank of South Africa, Lesetja Kganyago, speaks at the Bank of England conference 'Independence 20 Years On' at the Fishmonger's Hall in London, Britain September 29, 2017. REUTERS/Afolabi Sotunde

PRETORIA (Reuters) – South Africa’s central bank increased its benchmark lending rate by 25 basis points to 6.75 percent on Thursday in a close decision, saying the longer term inflation outlook remained elevated and that it could not risk waiting until later to act.

In a poll taken by Reuters last week, 16 of 26 economists said the South African Reserve Bank (SARB) would keep its repo rate at 6.50 percent while the rest opted for a 25 basis-point hike.

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Three of the six Monetary Policy Committee members wanted a 25 basis points increase while the other three called for no change, Governor Lesetja Kganyago told reporters in Pretoria.

“We then closed the room, debated vigorously until a decision was made. In the end, the decision was that we go with the 25 basis points hike,” Kganyago said.

“Delaying the adjustment could cause inflation expectations to become entrenched at higher levels and that contributes to second round effects that would require an even stronger monetary policy response,” Kganyago said.

The rand was buoyed by the decision, firming by more than 1.3 percent to the dollar, its strongest level since Aug 10. It later traded at 1.01 percent firmer at 13.7750.

Reporting by Olivia Kumwenda-Mtambo, Alexander Winning, and Nomvelo Chalumbira; Writing by Mfuneko Toyana; Editing by James Macharia

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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