Durban - Consumers should brace themselves as economists have predicted another interest rate hike to be announced by the Monetary Policy Committee (MPC) this week.
The MPC is expected to meet on Thursday.
Economists have listed high inflation, the weak rand and the energy crisis as among the reasons for the expected hike in the rate.
Professor Bonke Dumisa, an independent economic analyst, said he expected an increase of 25 basis points.
“The South African Reserve Bank will increase the interest rate if inflation targets of 3% to 6% are not achieved. The inflation rate is hovering around 7% and I can’t see a significant change in it any time soon, which will most likely mean an increase in the interest rate this week.”
Dumisa said he did not expect to see any decreases in the interest rate this year due to the struggling economy and the power crisis.
Professor Irrshad Kaseeram of the University of Zululand’s economics department said he also expected the interest rate to be hiked on Thursday.
“The rand has depreciated badly in the past weeks; it’s close to R20 to the dollar. The South African Reserve Bank has a mandate to protect the South African rand and they will need to do that by increasing the interest rate.
“The weaker rand means an increase in import costs and this will lead to an increase in the price of manufacturing, leading to higher prices for the consumer and an increase in inflation.”
Kaseeram said the country was already dealing with an energy crisis and a high unemployment rate.
“The South African Reserve Bank can’t leave the interest rate unchanged, as this will mean inflation will be even more out of control. It is currently above the inflation target.
“Unfortunately the state of the economy with constant load shedding and rising unemployment is also leading to more inflation and a higher interest rate.”
He said if the US Federal Reserve did not increase their interest rates there will be a 25 basis points increase by the South African Reserve Bank; while if they do hike interest rates, then we will see a 50 basis points increase as South Africa generally follows the trend they set.
“Either way there will be an increase in the interest rate,” he said.
Neil Roets, CEO of Debt Rescue, said it was inevitable that there would be an interest rate hike.
“We expect an increase of at least 50 basis points. Our economy is not moving in the right direction with escalating costs, and businesses and consumers feeling the impact. These are all contributing factors that will lead to another interest rate hike.”
Roets said another interest rate hike would be tough on consumers.
“We have millions of people in South Africa in debt and this will only make things worse for them.
“We also have businesses closing down due to load shedding, and now with another interest rate hike imminent there will be more businesses shutting down due to being unable to pay debt.
“Unfortunately, there is no light at the end of the tunnel at this stage, due to pressure on the world-leading economies,” he said.