Interest rate hike

The Bank of England announced its seventh interest rate hike in less than a year on Thursday, despite forecasting a recession, as it battles the highest ...

The bank’s policymakers were split on how aggressive to be this month, with three members arguing in favor of a three-quarter point hike. Its deliberations are being complicated by the weak pound, which fell to a new 37-year low against the US dollar on Wednesday. It forecast UK GDP to decline by 0.1% in the third quarter, partly as a result of the extra public holiday for the Queen’s funeral. The central bank repeated last month’s hike of half a percentage point, taking rates to 2.25% from 1.75%. GDP fell by that much in the second quarter. Benchmark US rates now stand at between 3% and 3.25%.

Economists polled by Reuters last week expect the bank to raise rates to 2.25% from 1.75%, while financial markets have priced in a bigger move to 2.5%. Either ...

The bank's policymakers were split on how aggressive to be this month, with three members arguing in favor of a three-quarter point hike. Its deliberations are being complicated by the weak pound, which fell to a new 37-year low against the US dollar on Wednesday. It forecast UK GDP to decline by 0.1% in the third quarter, partly as a result of the extra public holiday for the Queen's funeral. The central bank repeated last month's hike of half a percentage point, taking rates to 2.25% from 1.75%. GDP fell by that much in the second quarter. Benchmark US rates now stand at between 3% and 3.25%.

South Africa's central bank is expected to fully unwind its extraordinary pandemic-era stimulus measures when it raises interest rates today. The five-member ...

President Thabo Mbeki has placed blame for load shedding and the ailing economy on a lack of quality leadership in both government and society. The country has been hit with more bouts of severe power cuts, impacting on households and businesses. The accused were arrested in a series of swoops in Bloemfontein, Pretoria and Durban on Monday and Tuesday.

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 announcement today by the Monetary Policy Committee (MPC) of an interest rate hike of 75 basis points throws South Africans into a debt crisis.

In terms of the impact of the hiking cycle on the property market, Seeff says we are beginning to see a two-paced market emerge. “Realistically, the SARB is caught between a rock and hard place right now,” says Tony Clarke, MD of the Rawson Property Group. “This is possibly because interest rates are still lower than pre-pandemic levels of around 10%. Today’s interest rate hike of 75 basis points could harken a debt crisis for consumers and homeowners who bought on the edge of their affordability. He says deteriorating buying conditions will likely “push more people into the rental market”. Loos says FNB predicts rates could hit a high of 10.25 this year before stabilising next year.

From mortgages and the housing market to credit cards and loans, half-point increase will have an impact.

But Halifax and many commentators have warned of [a more challenging period ahead](https://www.theguardian.com/business/2022/sep/07/uk-house-prices-halifax-warns-of-more-challenging-period). It comes as the cost of living crisis forces people to put more on credit and take out loans to pay bills. Credit card rates are variable but not typically explicitly linked to the base rate, so will not automatically go up, though they have been increasing in recent months. And cost of living pressures are clearly going to weigh more heavily on many people over the coming months. [most recent UK Finance data](https://www.ukfinance.org.uk/data-and-research/data/arrears-and-possessions), which runs to the end of June, paints a mixed picture. Official data showed that the annual rate of UK price growth At the end of June there were 74,540 homeowner mortgages in arrears to the tune of 2.5% or more of the outstanding loan. Someone coming to the end of a fixed rate deal with a £200,000 mortgage could be paying £4,300 more each year for their mortgage - an extra £358 per month.” A year ago, at the height of the mortgage price war, it was possible to lock into an interest rate of less than 1% for two or even five years. For the 2.2 million people on a variable rate mortgage, the rise is very bad news, leaving many having to pay hundreds of pounds extra a year. The other half are on their lender’s standard variable rate (SVR). Unfortunately for those on fixed rates, about half are due to expire within the next two years.

The Reserve Bank's Monetary Policy Committee (MPC) cranked up the benchmark repo rate by 75 basis points to 6.25% on Thursday to rein in consumer inflation ...

This will add further pressure on consumers in the near term while it takes time for the higher interest rates to temper inflation.” Consumer inflation (the blue line) breached the upper target range of 6% in the second quarter of 2022, and is likely to remain outside the range until the middle of 2023, when food and fuel inflation is expected to moderate. So we can expect further rate increases at the last two MPC meetings for the year, perhaps at a similar pace of the US Fed, if inflation does not cool markedly. The latest increase in interest rates returns SA to pre-Covid levels, but this time with galloping inflation and countrywide load shedding. “It will likely be elevated for some time as firms try to make up in margins, and recover the difference between consumer and producer prices (which reached 18.0% in July). This is an ideal time for consumers and businesses to take advantage of higher investment rates and minimise consumption-driven credit usage,” says Celliers. EY Africa chief economist Angelika Goliger says although inflation has come off the boil slightly, dropping to 7.6% in August, it remains high. Our forecast for GDP to expand by just 1.8% in 2022 is below the consensus.” - The easing of global oil prices has contributed to a less aggressive rise in fuel price inflation for this year, at 33.7% (down from 38.8%). The primary tool used to cool inflation is the repo rate (in green), and it’s been a losing battle as consumer price increases veered dangerously close to 8%. “…austerity is likely to remain order of the day, further adding to headwinds facing domestic demand. Inflation hit a 13-year high of 7.8% in July before easing to 7.6% in August.

Chief Economist at Econometrix Azar Jammine says the latest rate hike will hurt indebted consumers but says the current rates are not too different from the ...

The output gap is still expected to turn positive in the second quarter of 2023. “Our current growth forecast leaves the output gap broadly unchanged. Jammine’s comments follow the Reserve Bank’s decision to increase the repurchase rate to 6.25% and the bank’s prime lending rate to 9.75%.

America's Federal Reserve raised interest rates again by a further 0.75% yesterday, the Bank of England boosted its rate by just half a percent.

Deutsche Bank senior economist Sanjay Raja commented: “The Bank of England delivered in line with expectations. Sterling fell to its lowest level against the dollar since 1985 following the Fed’s decision. Evans added: “Interest rate markets are now also pricing in a 75bps hike at the next meeting in November, while there are still more than ten hikes priced in by the middle of next year. A gentler approach to rate rises risks sending sterling into a tailspin, and seeing inflation get even further out of control. “I wish there were a painless way to do that. “The MPC will feel its hand was forced.

The interest rate hike effectively increases the cost of servicing credit and will see consumers paying more to service debt, which includes credit cards, ...

"The revised repurchase rate path remains supportive of credit demand in the near term, while raising rates to levels more consistent with the current view of inflation risks. When delivering the decision of the Monetary Policy Committee on Thursday, Reserve Bank governor Lesetja Kganyago said: "The level of the repurchase rate is now closer to the level prevailing before the start of the pandemic. The SA Reserve Bank has raised interest rates by 75 basis points.

The rise in interest rates will have a two-pronged negative impact on hospitality, claims UKHospitality.

Further increases are predicted for later in the year and into 2023. The last time interest rates were this high was during the 2008 financial crisis. “This underlines the acute need for further support for the industry, in the form of business rates reliefs and reduced rates of VAT to spur recovery in a vital sector upon which millions of jobs depend.”

In the light of this week's news, Nick Henshaw, Head of Intermediary Distribution at Wesleyan Group, said: “Much of the reaction to the announcement of a ...

Putting money in smoothed managed funds offers the opportunity to invest in equities and therefore bring the potential for higher returns over the long term, while the process of smoothing brings some protection from market volatility as returns are balanced out in good and bad years. Meanwhile, we have seen more stock market volatility this week amid concerns about declining company earnings, further rate increases ahead and the ongoing situation in Ukraine. “That’s entirely right, but let’s not forget that people’s cash savings are losing value every day that interest rates are outpaced by inflation, which is currently around four times higher.