Tough times ahead for South Africans amid inflation worries, looming rate hike
More tough times lie ahead for South African consumers ahead of an expected repo rate hike by the South African Reserve Bank on Thursday.
In January, the Reserve Bank hiked rates by 25 basis resulting in the current repurchase rate standing at 4%.
Director and Chief Economist of Econometrix Dr Azaar Jammine has warned that the central bank’s Monetary Policy Committee (MPC) is likely to raise interest rates as a direct result of Russia’s invasion of the Ukraine.
Jammine says the likelihood of interest rates being increased has jumped from a 50% chance to a nailed-on certainty.
“The expectation regarding the repo rate for this particular monetary policy meeting has possibly changed as a result of the events surrounding the invasion of Ukraine by Russia and this is largely because of oil prices shooting up and other commodity prices, like wheat and sunflower, have notably risen quiet sharpy as a result the Reserve Bank is likely to revise its forecast for inflation upwards.
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“There is now a real possibility that the 6% upper-end of the inflation target could be broken. Under the circumstances, what people thought was a 50/50 chance of a repo rate hike at this forthcoming MPC meeting has now probably escalated to virtually 100%. The Reserve Bank is bound to increase interest rates now to sustain the stability of the rand.”
Russia’s invasion of the Ukraine has had a negative economic impact on South Africa.
One of the main consequences has been the price of Brent Crude oil, which has risen to unprecedented levels at one point hitting $140 a barrel.
