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SA warned to brace for possible interest rate hike

The Reserve Bank is expected to raise interest rates this afternoon as inflation is expected to be higher.

The South African rand. Picture: Craig Wynn/EWN.
South African economy,reserve bank,interest rates,Monetary Policy Committee,Reserve Banks Monetary Policy Committee
Business Local

JOHANNESBURG - South Africans have been warned to brace themselves for an interest rate hike today, with experts predicting an increase of either 25 or 50 basis points.

The South African Reserve Bank’s Monetary Policy Committee (MPC) started it’s meeting on Tuesday and will conclude with a decision on rates this afternoon.

The rand has also weakened since the last MPC meeting in November, leading to expectations that inflation will be worse than forecast.

First National Bank economist Sizwe Nxedlana says he expects rates to increase by 25 basis points, but adds that the country is heading into a hiking cycle.

“So what we’ve penciled in is a series of interest rate hikes that we expect will lead up to a cumulative of 100 basis points over the course of this year.”

Nedbank’s Isaac Matshego says the Reserve Bank should increase interest rates by 50 basis points.

“Front load those increase, which simply means that the Reserve Bank cannot keep on raising by a quarter percentage point.” 

Deteriorating inflation has been attributed to a number of factors including the weak rand, rising food costs due to the drought and possible electricity tariff hikes.

ANC CONCERNED

The African National Congress (ANC) says the state must do everything it can to prevent the economy from sliding into a recession and has warned that another ratings downgrade would be disastrous.

The ruling party concluded its three day NEC Lekgotla in Centurion yesterday, where it discussed its campaign for the local government elections and the state of the economy.

The party’s comments follow warnings by ratings agency Standard and Poor’s that it is closely monitoring investment in the country.

Secretary-General Gwede Mantashe said, “One issue that we need to work on constantly is to prevent another downgrade of the credit rating. If we get that, we will be in trouble and it will be very expensive to get loans.”

(Edited by Shimoney Regter)

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