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Reserve Bank hikes rates by another 50 basis points

Neelam Rahim | neelam@radioislam.co.za

2-minute read
27 May 2023 | 19:16 CAT

Image: SAPeople

Image: SAPeople

As was expected, the Reserve Bank’s Monetary Policy Committee has decided to hike the repo rate by 50 basis points. Economists were hoping for no change or at least only 25 points. This means South African consumers will pay the brunt of this decision, and life will worsen. Economists expected another interest rate hike – the tenth consecutive increase since November 2021. It has hiked rates by a total of 475 basis points since then.

Chief economist at the Efficient Group, Dawie Roodt, spoke to Radio Islam International. While no change was expected a month ago, Roodt hoped for a 25 basis points increase three weeks ago. However, he said in the last two weeks, it became clear that things are deteriorating fast after the allegations by the American Ambassador.

There was a general belief that the SARBS’s hiking cycle would end soon after the March interest rate hike.

Business Tech reported that Reserve Bank governor Lesetja Kganyago said the move to hike rates comes amid persistently high consumer price inflation and a sluggish economy – exacerbated by severe load shedding.

Risks to inflation are viewed to the upside, and the headline rate is expected to stick outside the target range until the third quarter of this year, the governor said.

According to Roodt, the governor paints a picture of an economy in deep trouble. In the short term, this is most painful to South Africans and will likely suppress the demand economy, weigh on economic growth and increase unemployment and poverty.

However, Roodt argues it is not the fault of the Reserve Bank; instead, it is because of South Africa’s uncompetitive macro environment, caused mainly by the government.

Listen to the full interview on Your World Today with Mufti Yusuf Moosagie.

 

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