ANALYSIS | With the cost of borrowing higher than it has been since the 2008 global financial crisis, some suspect interest rates are nearing their peak.
The Reserve Bank has received consistent criticism since it began raising the repo rate in November 2021.
Higher interest rates, its detractors have said, would throw cold water on the country’s already glacial economic growth. They also pointed out that hiking the cost of borrowing would probably not go far in the way of bringing down inflation, which is largely the result of supply-side blockages. In March, the MPC unexpectedly raised the repo rate by 50 basis points, bringing it to 7.75%. This was despite the committee’s dire prognosis for the economy, which is expected to grow less than 1% in 2023, the result of the country’s deepening energy crisis.
Meanwhile, the country’s energy crisis has played into the rand’s recent bout of weakness — a predicament which threatens to push up inflation and which the Reserve Bank has to respond to, given its mandate to protect price stability.But despite these inflationary pressures, which look like they will persist through the rest of 2023, some believe the Reserve Bank’s hiking cycle is near its peak.
“I think we are very close to the peak. I think the Reserve Bank has kind of acknowledged that there is not a lot of scope to raise rates significantly more,”
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