SA Reserve Bank interest rate hiked by 75 basis point
The South African Reserve Bank’s monetary policy committee (MPC) has implemented Interest rates similar to pre-pandemic levels after the SA Reserve Bank hiked rates by 75 basis point.
Following a three-day meeting with the Monetary Policy Committee (MPC) Governor of the SA Reserve Bank, Lesetja Kganyago said five committee members were split while two wanted a 100 basis point increase the three others voted in favour of the 75 basis point hike.
The move brings the repo rate to 6.25%, and the prime rate to 9.75%. On a new home loan of R2 million, this hikes the monthly instalment by more than R970.
Governor of the SA Reserve Bank said that the bank is under pressure to keep up with jumbo interest rate hikes in other countries, especially in the US, where rates were hiked by 75
He said that South Africa cannot afford to be left behind when it comes to rate hikes, otherwise the rand and local assets like bonds will lose their appeal to foreign investors, who are on the hunt for good returns. A stable rand is key to inflation, as South Africa imports almost all its oil, priced in dollars.
The rand is currently taking a lot of strain as the dollar is bolstered by aggressive US rate hikes. It is currently close to R17.80/$, after starting the year below R16. Guiding inflation back towards the mid-point of the target band can reduce the economic costs of high inflation and enable lower interest rates in the future.
By Everngelista Muza