Interest rates are now at their highest levels since 2016 after the SA Revenue Bank (SARB) hiked rates by 75 basis points, for the third meeting in a row.
The repo rate has raised to a level last seen before the start of the Covid-19 pandemic, increasing by 75 basis points to 7%.
Lesetja Kganyago, South African Reserve Bank Governor on Thursday announced that the repo rate now stands at 7%, a bitter pill to swallow for those with bonds or who owe money.
Kganyago said that inflation needed to be kept in check and for now, a high repo rate would be able to help with this.
“In the second quarter of this year, inflation breached the upper end of the target range and is forecast to remain above it until the second quarter of 2023.”
He said central banks around the world have been doing the same.
“Higher than expected inflation has pushed major central banks to accelerate the normalisation of policy rates. It has tightened global financial conditions and raised the risk profiles of economies needing foreign capital.”
The move brings the repo rate to 7%, and the prime rate to 10.5%.
On a new home loan of R2 million at the prime rate, the latest increase hikes the monthly instalment by around R1000. Since November last year, monthly payments on a R2 million home loan are almost R4,500 more expensive due to a raft of rate hikes.
High inflation and weak economic growth continue to shape global conditions alongside monetary and fiscal policy responses.
On Thursday, Kganyago warned of high inflation and weak economic growth.
The monetary policy committee expects the headline inflation rate to remain above its maximum target rate of 6% until the second quarter of 2023.
Source: Moneyweb, News24, Daily Maverick, Eyewitness News, image from Twitter: @MadiBoity
