Economist Roelof Botha says the SARB never had reason to start its “nonsense” of raising rates this high, and the average South African is paying the price.
An economist has warned South Africans that they are paying the cost of an unnecessarily harsh monetary policy, which is closing households at R4,000 a month at least., South Africa’s interest rates do not need to be as high as they currently are.
Since then, the South African Reserve Bank has increased interest rates by a total of 475 basis points. Currently, the repo rate is at a 14-year high of 8.25% and the prime lending rate is at 11.75%. “It was never necessary to raise interest rates to the levels they did. Now, a little bit more than two years later, households are paying 9% of their disposable income on average on servicing debt,” he said.
Botha highlighted that this additional cost could have been spent on goods and services, which could have stimulated the economy and created more jobs. Botha’s sentiment seems to align with that of other Economists within FNB, who warned that if the South African Reserve Bank maintains its high interest rates beyond what is necessary, the country could experience a technical recession.
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