As inflation soars out of control in South Africa along with the cost of living crisis, analysts are predicting more pain for consumers when the South African Reserve Bank Governor, Lesetja Kganyago, announces the changes for interest rates later this week.
Kganyago will deliver the decision taken by the SARB’s Monetary Policy Committee (MPC) on Thursday.
At the previous MPC meeting, consumers were left shocked as the Reserve Bank hiked the repurchase rate (repo rate) by 50 basis points.
The central bank has been on an aggressive trend of hiking the rate in a bid to help curb inflation, which saw the previous eight meetings by the committee voting for an increase.
The Reserve Bank has now raised rates for the ninth time in a row, adding a total of 425 bps to the repo rate since it began tightening policy in November 2021 to tame inflation.
At the previous meeting held in March this year, it raised the repo rate from 7.25% to 7.75%, which meant that the prime lending rate in the country increased from 10.75% to 11.25%.
Analysts have widely predicted another hike of 25 basis points for this week, which will see the repo rate increase to 8% and the prime lending rate to 11.50%.
Frank Blackmore, Lead economist at KPMG, told Business Report, “The SA Reserve Bank’s MPC is committed to reducing inflation to the target of 4.5%. The current inflationary reads from March this year is at 7.1% and there is an expectation that inflation will remain at this level in April, which should be out in two weeks’ time. If Inflation remains around that level, it is well above the Reserve Bank’s target and will mean that the MPC will increase the repo rate potentially by 25 basis points.”
“This increase would be in line with other areas around the world, after their recent meeting that was held. Other factors contributing to the potential increase would be the recent weakening of the rand and the persistent level of inflation that we have seen through to April this year,” he further said.
“There is an expectation for inflation to start reducing from May onwards, given that it was in May last year, that the biggest inflationary increases started coming through,” Blackmore said.
If the Reserve Bank’s MPC surprises once again by announcing an increase of 50 BPS, this would take the repo rate to 8.25% and the prime lending rate to 11.75%.
BUSINESS REPORT