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More bad news for consumers as Reserve Bank set to raise interest rates

The Reserve Bank says it's set to continue raising interest rates in order to keep inflation in check.

Picture: Facebook.

JOHANNESBURG - The Reserve Bank says it's set to continue raising interest rates in order to keep inflation in check.

The bank has said at its Monetary Policy Forum that raising rates is the only way to stop increasing prices despite the costs to the economy.

To make matters worse, petrol and diesel go up by significant amounts at midnight tomorrow.

The Reserve Bank has raised the repo rate by a total of 200 basis points in the past two years as it fights accelerating consumer prices, triggered by a depreciating currency, drought and above-inflation wage hikes.

The bank says it expects headline inflation to peak at 7.8 percent this year well outside the limit of its upper target of six percent.

This is a blow for consumers who face a rise a rise in the petrol price of 88 cents a litre, while diesel goes up by 95 cents.

Higher transport costs will also lead to higher food price, increasing inflationary pressures.

RESERVE BANK UPS REPO RATE BY 25 BASIS POINTS TO 7%

Reserve Bank governor Lesetja Kganyago last month announced that the Bank would increase the repo rate by 25 basis points.

This meant the repo rate, which is the rate at which the bank lends money to banks, would rise to 7 percent. The prime lending rate, the figure charged by banks to customers, increased to 10.5 percent.

Kganyago cited rising inflation and a volatile rand as some of the major concerns of the reserve bank.

Food price pressures also impacted on consumer spending, with overall growth still restricted.

He argued while inflation was at 6.2 percent for January, the bank expects inflation to return to within its target range by the end of 2018.

In January the bank hiked the repo rate by 50 basis points to 6.75 percent, pushing the prime lending rate to 10.25 percent.

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