South African Reserve Bank raises repo rate to 7.25%

The South African Reserve Bank has increased the repo rate by 25 basis points to 7.25%, bringing the prime rate to 10.75%. This decision was driven by inflation concerns, as the August reading rose to 4.4% from 4.3% in July, exceeding the bank's 3% target.

This move reflects a broader global trend in monetary policy. The US Federal Reserve and the European Central Bank have also implemented rate hikes in response to rising inflation, often fueled by increasing oil prices and their subsequent impact on the cost of goods and services.

While traditional economic theory suggests that higher interest rates slow economic growth and market activity by increasing borrowing costs, historical data from the S&P 500 since 1982 indicates that shares have performed better following rate hikes than following rate cuts.