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South Africa Raises Interest Rates

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http://www.bbc.co.uk/news/business-25945067

South Africa's central bank has raised interest rates, a day after a similar move by Turkey.

South Africa's Reserve Bank surprised observers by boosting its main interest rate to 5.5% from 5%.

Bank governor, Gill Marcus said "the depreciation of the rand exchange rate" was the primary cause of the rate rise.

She added that the global financial crisis was in a "new phase" and was "creating new challenges for emerging market economies".

So after India, Turkey another country raises interest rates.

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Not just emerging, NZ is softening up people for an imminent rate rise, from the stuff.co.nz titled article today:

Rate rise on way

The Reserve Bank is holding official interest rates at 2.5 per cent, but flagged a rise is just around the corner.

The central bank also says the high New Zealand dollar is "unsustainable".

The Reserve Bank statement this morning is seen as a clear sign interest rates will now rise in March.

It says it "remains committed" to increasing the OCR as needed to keep future average inflation near the 2 percent target mid-point. The scale and speed of the rise in the OCR will depend on future economic indicators.

"While headline inflation has been moderate, inflationary pressures are expected to increase over the next two years," Reserve Bank governor Graeme Wheeler said.

"In this environment, there is a need to return interest rates to more normal levels. The Bank expects to start this adjustment soon."

Westpac Bank economists said the Reserve Bank statement gave the "clearest possible signal" that rates would rise in March, by 25 basis points.

"The economic case for hiking the OCR is clear, but the RBNZ is better off waiting for the superior communication opportunity offered by the March MPS [monetary policy statement] before actually pulling the trigger," Westpac chief economist Dominick Stephens said.

The central bank also gave the impression that it was now expecting a more aggressive set of interest rate rise than implied in December.

"Extremely bullish words were chosen to describe the current state of, and outlook, for economic activity in New Zealand," Stephens said.

The central bank also took a jab at the high dollar, which fell more than half a US cent after the OCR was held.

"The high exchange rate continues to dampen inflation in the traded goods sector, but the bank does not believe the current level of the exchange rate is sustainable in the long run," Wheeler said.

The New Zealand dollar was trading at US82.6 cents shortly before the Reserve Bank's announcement, but immediately dropped to just US82c on confirmation that the cash rate was still on hold.

Westpac currency traders said that was unsurprising, given there was some pricing in the market on the expectation that rates would be raised today.

The official cash rate is sitting at a record low 2.5 per cent, and before today's announcement, financial market pricing suggesting a move was a close "50/50" call, with some bank economists expecting a rise. A rate rise had been expected to spark another jump in the currency.

Meanwhile, the Green Party blamed the Government's failure to fix the Auckland housing crisis for predicted interest rate hikes, which it said would hurt the whole economy.

"Higher interest and exchange rates will effectively cost jobs, exports, and raise the cost of living for all those with mortgages," Green Party co-leader Russel Norman said.

"A possible 1 per cent hike in the OCR will raise the average homeowner's interest payments by $70 a fortnight."

This morning the United States Federal Reserve said it would cut its monthly bond purchases by an additional $10 billion to $65 billion because of a strengthening US economy. It's doing so even though the prospect of reduced Fed stimulus and higher US interest rates has rattled global markets.

The Reserve Bank of New Zealand said in its one page statement, this morning that this country's economic expansion had "considerable momentum".

Prices for export commodities were "very high", especially for dairy products, consumer and business confidence were strong, and the rapid rise in net inward migration over the past year had added to consumption and housing demand. Construction was being boosted by the Canterbury rebuild and by work in Auckland to address the housing shortage.

However, that would be partly offset by continued government belt-tightening.

The economy grew 3.5 per cent in the year to September, and growth was expected to continue around this rate over the coming year, the Reserve Bank said.

While agricultural export prices were expected to come off their peak levels, overall export demand should benefit from improving growth in the global economy, the bank said.

However, improvements in the major world economies had required "exceptional monetary accommodation" and there remained uncertainty about the timing of withdrawal of this stimulus and its effects, especially on emerging market economies, the statement said.

Annual inflation was 1.6 per cent in 2013, and forward-looking measures of firms' pricing intentions have been rising.

Construction costs were increasing and risk feeding through to broader costs in the economy.

"At the same time, there appears to have been some moderation in the housing market in recent months," the New Zealand central bank said.

The high exchange rate continued to dampen inflation in the traded goods sector, but the bank did not believe the the exchange rate is sustainable in the long run.

Many bank economists had expected rates to remain unchanged this week, but for the Reserve Bank to flag a rise in six weeks time at the March monetary policy statement.

Stronger-than-expected inflation figures last week meant that a possible rate rise this week has become "a close call".

Expectation that official interest rates were rising this year had already seen longer-term mortgage rates jump, with three-year rates looking the best bet for borrowers, according to a BNZ economist.

The floating mortgage rate is presently about 5.74 per cent but Bank of New Zealand economists expect it to hit 6.25 per cent before the middle of the year and near 7 per cent by the end of the year, as the Reserve Bank pushed up the cash rate.

The Reserve Bank's last report in December implied four or five interest rate rises this year, starting in March of April.

But since the end of last year, three-year fixed-term mortgage rates have already jumped from just under 6 per cent to about 6.4 per cent.

It seems the banksters are well internationally organized.

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Not just emerging, NZ is softening up people for an imminent rate rise, from the stuff.co.nz titled article today:

Rate rise on way

It seems the banksters are well internationally organized.

"The Reserve Bank this morning kept the official cash rate at 2.5 per cent, but flagged an interest rate rise was just around the corner. The central bank also says the high New Zealand dollar is "unsustainable".

How does that work? I thought it would strengthen a currency if interest rates were increased.

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"The Reserve Bank this morning kept the official cash rate at 2.5 per cent, but flagged an interest rate rise was just around the corner. The central bank also says the high New Zealand dollar is "unsustainable".

How does that work? I thought it would strengthen a currency if interest rates were increased.

they mean it won't stay high?

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