Repo rate South Africa

Two of the five members of the monetary policy committee voted in favour of 100 basis point hike.

Foreign inflows are crucial to keep the rand stable. It is currently close to R17.80/$, after starting the year below R16. "And that is what our focus is." 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. There is still one more monetary policy committee meeting left, in November. Economists expect another rate hike – even though inflation may have peaked. On a new home loan of R2 million, this hikes the monthly instalment by more than R970. Electricity and other administered prices continue to present clear medium-term risks." Oil prices increased strongly from the start of the war, to around US$130 per barrel, and may rise again from today’s level as stresses in energy markets intensify. While the rate hikes will heap more pain on a distressed South African economy, 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 basis points on Wednesday. The move brings the repo rate to 6.25%, and the prime rate to 9.75%. - This will heap more pain on a stressed economy, but the bank has to keep up with global rate hikes to keep the rand stable.

The cost of living in South Africa continues to go up after the South African Reserve Bank (Sarb) increased the lending rate on Thursday.

We also know that we need to keep in step with some of our trading partners and a lot of them are increasing with these sorts of increments at the same time.” Ahead of the announcement, Frank Blackmore, Lead Economist at KPMG South Africa, said, “It is generally accepted that at least a 75 basis points increase in the repo rate will take place, increasing that rate from the current repo rate 5.5% to 6.25% and therefore the prime rate increasing from 9% currently to 9.75%. In the second quarter, flooding in Kwa-Zulu Natal and more extensive load-shedding contributed to a contraction of 0.7%,” Kganyago said. “This year the Sarb expects the SA economy to grow by 1.9%, (from 2.0%). “In contrast to fuel, food inflation continued upwards. The supply of energy to the Euro Area is limited as winter approaches, placing immense strain on households, businesses and governments.”