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Inflationary risk forces Reserve Bank into first interest rate hike in 3 years

18 November 2021 6:48 PM
Tags:
Interest rates
Sarb
Repo rate
The Money Show
Inflation
Reserve bank
Monetary Policy Committee
Lesetja Kganyago
Xhanti Payi
interest rate
MPC
Dr Thabi Leoka
Bruce Whifield

Consumers are being impacted by factors not in our control - Bruce Whitfield interviews economist Dr Thabi Leoka.
South African Reserve Bank (Sarb) Governor Lesetja Kganyago. Picture: @SAReserveBank/Twitter

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.

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:




18 November 2021 6:48 PM
Tags:
Interest rates
Sarb
Repo rate
The Money Show
Inflation
Reserve bank
Monetary Policy Committee
Lesetja Kganyago
Xhanti Payi
interest rate
MPC
Dr Thabi Leoka
Bruce Whifield

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