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Inflationary risk forces Reserve Bank into first interest rate hike in 3 years
The South African Reserve Bank has hiked the repo rate by 25 basis points to 3.75% - the first increase in three years.
This brings the prime lending rate to 7.25%.
South African Reserve Bank (Sarb) Governor Lesetja Kganyago announced the Monetary Policy Committee's decision on Thursday afternoon.
WATCH: Governor @KganyagoLesetja delivered the Monetary Policy Committee (MPC) statement. To watch the full press conference click here: https://t.co/eGazkq4qAJ
— SA Reserve Bank (@SAReserveBank) November 18, 2021
Use #SARBMPCNOV21 https://t.co/q3SZN0Chn2
On the eve of the announcement George Glynos, Head of Research at ETM Analytics, told Bruce Whitfield he did not envy the MPC as the variety of factors to consider would make it a tough decision.
RELATED: Inflation rate steady at 5%, all eyes on Thursday's interest rate decision
The Money Show host discusses the consequences of the rates increase with economist Dr Thabi Leoka.
While the Reserve Bank must mitigate the risks of inflation, the hike means taking even more money out of the pockets of consumers already under tremendous financial pressure, notes Whitfield.
Dr Leoka says Sarb had no choice.
I think the Governor put it well that there were increased inflationary risks... Higher oil prices, higher electricity prices, higher domestic import tariffs and escalating wage demands were some of the issues that he highlighted as reasons for the small increase in the repo rate.
Dr Thabi Leoka, Economist
They were very considerate considering they could have done more given the heightened risks that they foresee.
Dr Thabi Leoka, Economist
They are all mostly exogenous factors that have increased inflation and will do so for quite some time given what is happening with global oil prices... domestic tariffs and also the currency. Added to that are the wage demands that we seem unable to rein in.
Dr Thabi Leoka, Economist
Unfortunately for the consumer it is not something that is driven by us... What we should be doing as consumers is saving more, because this actually benefits the savers and also helps to attract foreign investment, and indirectly is positive for the currency...
Dr Thabi Leoka, Economist
Listen to the discussion on The Money Show:
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