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Mixed reaction to repo rate hike

Yesterday, the Reserve Bank announced that interest rates will increase to 6.25% as of today.

FILE: Rising food and power prices have been cited as some of the driving factors behind possible higher inflation. Picture: Facebook.

JOHANNESBURG - Economists appear to be divided on the Reserve Bank's decision to hike the repo rate by 25 basis points.

The Monetary Policy Committee met this week with concerns about the rand and rising prices.

Governor Lesetja Kganyago warned that inflation could be pushed higher to beyond the three to six percent target range.

Rising food and power prices have been cited as some of the driving factors behind possible higher inflation.

Nedbank economist Isaac Matsego says added to these pressures, is an imminent interest rate hike in the US, which will also affect the rand and therefore the cost of living.

"The Federal Reserve is expected to hike rates next month. That was confirmed by minutes of their meeting which was released last night."

However independent economist Thabi Leoka says she didn't expect an increase in the repo rate.

"With inflation at about 4,7 percent, it means that we are well within the target band."

There is a little bit of good news though, with the oil price continuing to drop, governor Kganyago expects a slight decrease in fuel prices next month.

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