The Monetary Policy Committee (MPC) raised interest rates on Thursday by 50 basis points to 11.50% subsequently seeing commercial banks raising the prime interest rate to 15%. And this may not be the last hike we will see this year with inflation in South Africa continuing to rise. The Reserve Bank governor, Tito Mboweni went on to say that the committee believed that inflation would peak just bellow 9.5% in the first quarter of 2008 and then return into the bank’s inflation target of three to six percent in the last quarter of 2009.

One wonders what will happen if Eskom get the go ahead to increase the electricity tariffs by 53%. It would be very difficult to see the target of 3 - 6% being reached. Some analysts however have questioned the central banks decision to raise rates by 50 basis points but the central bank really had no option if their primary aim is to keep the inflation down. For those heavily in debt, this hike will not be good as monthly repayments are going to sky rocket and forcing more and more people to cut down on their spending and maybe even be forced to sell off some assets.

Subscribe

Sign-up to receive the latest updates from TheRandToday.com direct to your mailbox

Loading ...