50 basis points increase only the beginning says economist

By Ilhaam Hoosain
13 June 2008

The Reserve Bank Governor Tito Mboweni raised the repo rate by only 50 basis points on Thursday.

Some economists have expressed relief because this takes the prime interest rate that banks charge their clients to 15.5 percent.

Econometrix economist Tony Twine says that the rising of the interest rate (by 50 basis points) will not be the end of it. As long as the inflation rate in the South African economy continues to move upwards, Governor Tito Mboweni has made it clear that the Reserve Bank will be forced to keep raising interest rates.

“It won’t all happen in one go but with inflation continuing to move up, interest rates will continue to move up.

“The first sign that we can see in our models of any relief coming through on the interest rate front would be late in 2009 and that would be at the very, very earliest,” says Twine