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, which rose to 4.4% in August from 4.3% in July, exceeding the bank's 3% target.

This rate hike is part of a broader global trend. The US Federal Reserve and the European Central Bank have also implemented 25 basis point increases recently. Rising oil prices are cited as a primary factor driving inflation and the subsequent cost of goods and services worldwide.

While traditional economic theory suggests that rate hikes slow the economy by increasing borrowing costs and making new ventures harder to fund, historical data shows a different trend for equity markets. Since 1982, the S&P 500 has performed better following rate hikes than following rate cuts.