Three of the five members of the Monetary Policy Committee voted in favour of a 75 basis point hike on rates. This is the second consecutive time the bank increased rates by three-quarters of a percentage point.
FILE: Reserve Bank Governor Lesetja Kganyago. Picture: GCIS.
JOHANNESBURG – Homeowners and motorists will have to dig deeper into their pockets to cover the costs of their mortgages and car loans.
The latest blow to consumers follows an announcement by South African Reserve Bank Governor Lesetja Kganyago on the interest rates.
Three of the five members of the Monetary Policy Committee voted in favour of a 75 basis point hike on rates.
This is the second consecutive time the bank increased rates by three-quarters of a percentage point.
South African consumers have been dealt yet another blow as they contend with the rising cost of living.
The increase in interest rates is likely to compound the already existing stress of high fuel costs and skyrocketing food prices and inflation.
Nedbank economist, Isaac Matshego, said that the reserve bank didn’t have many options but to substantially hike rates to curb stubborn inflation.
“The Sarb is taking action to ensure that a decline in inflation continues, probably at a slightly faster pace,” Matshego said.
While Matshego believes the decision was in the economy’s best interest, he admits consumers who have debt linked to the prime rate are likely to feel the pinch.
“That is how we keep inflation under control,” Matshego said.
But Efficient Group economist Dawie Roodt said that it was not all bad news.
“The good news is that if you are depending or dependent on interest income and that’s mostly elderly, then there will be an increase of 1% on your interest received as well,” Roodt said.
The repo rate now sits at 6.25% and the prime lending rate at 9.75%.