Repo rate relief could soon be a thing of the past

With a significant petrol price increase expected next week, prices at the factory gate may also go up.

A rise in fuel and road accident fund levies, together with rising oil prices and a weaker rand have ensured higher prices. Picture: Michelle Lubbe/EWN.

JOHANNESBURG - While the Reserve Bank has chosen to remain cautious and keep the interest rate on hold, it's also warned that the rate could increase soon due to a number of external factors.

The Monetary Policy Committee has decided to keep the repo rate unchanged at 5,75 percent citing stable inflation.

South African Reserve Bank Governor Lesetja Kganyago made the announcement this afternoon.

However with a huge petrol price increase expected next week, prices at the factory gate may also go up.

With the petrol price deceasing by over R4 since August last year, South Africans could see the fuel prices slide back with an increase of around a record R2 expected next week.

A rise in fuel and road accident fund levies, together with rising oil prices and a weaker rand have ensured higher prices.

Nedbank economist Isaac Matsego says pressure is building for an increase.

"We really expect parts of the interest rate to be upwards from now onwards."

With South Africans already hit by rising food prices and continued e-toll fees, many will be hoping that rates remain unchanged.

Meanwhile, the Reserve Bank's decision to keep the repo rate unchanged has been welcomed by homeowners and money-borrowers.

Kganyago says the rate will be subject to continuous review.

"The MPC will remain vigilant and will not hesitate to act in order to maintain the integrity of the Inflation Targeting Framework."