Reserve Bank interest rates

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.