South Africa\u2019s main industry body questioned the central bank\u2019s decision to raise interest rates at a time of weak economic growth and fragile business sentiment amid the war in Iran.<\/p>\n\n\n\n
The hike in the policy rate last month \u201ccan barely be justified given the overall performance\u201d of the economy, the South African Chamber of Commerce and Industry said in a statement on Thursday. <\/p>\n\n\n\n
Monetary policymakers raised the benchmark rate by 25 basis points to 7% on May 28 \u2014 the first hike in three years \u2014 to anchor inflation expectations as the conflict in the Persian Gulf drives up energy and food prices. <\/p>\n\n\n\n
They also lifted their inflation forecast and now see price growth averaging 4.9% by the third quarter, up from 3.3% previously.<\/p>\n\n\n\n
\u201cOne could speculate that it may not have been necessary to increase interest rates given that the rise in fuel prices may be temporary and of short duration,\u201d the chamber said. <\/p>\n\n\n\n
\u201cThere is no evidence of demand-pull inflation that led to the acceleration in inflation.\u201d\u00a0<\/p>\n\n\n\n
Its view is in contrast to economists. \u201cThe hike was no surprise,\u201d Yvonne Mhango, Bloomberg\u2019s Africa economist, said last week. <\/p>\n\n\n\n
\u201cHigher oil prices forced policymakers to act preemptively as signs emerged that the oil shock was spreading beyond fuel prices.\u201d<\/p>\n\n\n\n
South Africa\u2019s economy has expanded by an average of less than 1% annually for more than a decade. <\/p>\n\n\n\n
A gauge measuring business confidence stood at 124.1 in May, up slightly from 123.6 in April but below 131.4 at the start of the year.\u00a0<\/p>\n\n\n\n
The Reserve Bank\u2019s Quarterly Projection Model points<\/a> to at least one more quarter-point rate increase this year. Governor Lesetja Kganyago has previously said the model is only a guide. <\/p>\n\n\n\n