The SA Reserve Bank's monetary policy committee hiked interest rates by 50 basis points to 7.75%. Economists were expecting an increase of 25 basis points. | News24_Business
Three members of the monetary policy committee voted in favour of the 50 basis point hike, while two wanted a 25 basis point increase. On a new home loan of R2 million at the prime rate, the latest increase hikes the monthly instalment by around R680. Since November 2021, monthly payments on a R2 million home loan are almost R5 500 more expensive due to a raft of rate hikes.
Reserve Bank governor Lesetja Kganyago said that inflation pressures remain a risk and that load shedding is pushing up the cost of living. In February, headline inflation unexpectedly rose to 7% - the first increase in four months - due in large part to raging food prices. Food and non-alcoholic beverages annual inflation hit 13.6% - the highest level since April 2009.
Apart from local inflation, the local monetary authorities must also keep track of US interest rates, which have seen aggressive hikes. The gap between US and South African interest rates can't widen too much, otherwise foreign investors – who are on the hunt for solid interest rates - will shun rand-based assets. This will put more pressure on the rand, which is already one of the worst currency performers this year.
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