Economists on the fence over interest rate announcement

The Monetary Policy Committee will today announce whether or not it will hike interest rates.

South African Rands. Picture: Christa Eybers/EWN

JOHANNESBURG - Economists appear to be mixed over whether the Monetary Policy Committee will increase interest rates today.

Inflation accelerated by 0.1 of a percentage point to 4.7 percent year on year in June from 4.6 percent year on year in May, Statistics SA data showed on Wednesday.

This is well within the reserve bank's target of three to six percent. However, there are concerns that inflation is set to rise in the next few months.

FNB chief economist Sizwe Nxedlana said that inflationary pressures may leave the Monetary Policy Committee without a choice soon.

"We would probably see 25 basis points interest rate hike but even if it's not tomorrow we think that an interest rate hike is imminent given the expected direction which inflation is going to take."

However economist Xhanti Payi said, for now, inflationary pressures are low.

"We should keep interest rates stable because there is no inflationary pressure to peak up in the short-term."

Pensioners with investments will welcome a rate increase but with toll roads, an increased fuel prices and rising food costs, many consumers will be hoping that the repo rate will remain unchanged.