Indebted consumers already drowning onner skuld will be facing more hardship with yet another interest rate hike on the cards.
This comes as the US Federal Reserve signalled its intention to resume interest rate increases amid a growing consensus that more tightening was needed to stamp out high inflation in the world’s largest economy, in spite of leaving rates unchanged for now, at 5 to 5.25%.
The South African Reserve Bank (SARB) this week gave the strongest indication yet that it would probably tighten its monetary policy further and implement another interest rate hike, though most experts predict a small increase of 25 basis points, according to Business Report.
The SARB has implemented a series of 75 basis point hikes over the past year – faster than in prior tightening cycles – in a bid to tame high inflation which slowed to 6.3% in May, above the upper limit of the bank’s target range of 3 to 6%.
The bank has raised the repo rate by a cumulative 425 basis points to its highest in 14 years, at a “restrictive” 8.25% per annum since it started tightening in November 2021 to combat surging prices.
Governor Lesetja Kganyago said the SARB expected inflation to continue tapering down and decline within the target range in the latter part of the second half of this year.
Kyangago said the SARB understood that high interest rates came with pain for consumers, but monetary policy was the only effective tool in the shed to deal with rising prices.
“This will come to an end at some point.
“What will that point be? It would be the point where we see that inflation is converging towards what we consider to be a level that is consistent with price stability, which for us is 4.5%,” Kganyago said.
“We do not take pleasure in South Africans losing houses or losing cars because interest rates have gone up.
“Interest rates are just a medicine we administer to deal with the disease of inflation.”
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