Following the South African Reserve Bank’s (SARB) decision to raise interest rates by 75 basis points at their third meeting in a row, current rates are at their highest possible level since 2016 and have not been this high in three years, News24 reports.
Two of the representatives of the Monetary Policy Committee advocated for a rise of only 50 basis points, while the other three members supported a rise of 75 basis points.
The move results in the repo rate being set at 7% and the prime rate being set at 10.5%.
The most recent increase brings about a one thousand rand increase in the monthly payment for a new mortgage of two million rand at the prime rate. Since November of the previous year, the monthly payments on a home loan of R2 million have become almost R4 500 more expensive as a result of a slew of rate hikes.
The most recent interest rate increase was in line with the forecasts made by economists.
On Thursday, the Governor of the South African Reserve Bank, Lesetja Kganyago, issued a warning about the country’s high inflation rate and sluggish economic growth.
The Monetary Policy Committee forecasts that the headline inflation rate will continue to be higher than the maximum rate of 6% that it targets until the second quarter of 2023.
It is not until approximately the second quarter of 2024 that it is anticipated that headline inflation will “sustainably revert” to the target range’s midpoint of 4.5 percent. Economists forecast that interest rates will not be lowered until inflation reaches this target level.
There is a lot of pressure on the Reserve Bank to raise interest rates in order to bring inflation under control, but they also need to do it in order to keep the rand’s value.
READ MORE: Beware, homeowners: the rate jump may be greater than anticipated
It is not until approximately the second quarter of 2024 that it is anticipated that headline inflation will “sustainably revert” to the target range’s midpoint of 4.5 percent. Economists forecast that interest rates will not be lowered until inflation reaches this target level.
The Reserve Bank is under a lot of pressure to raise interest rates in order to bring inflation under control, but they also need to do it in order to keep the rand’s value.