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Economists warn that rates hiking cycle may not be over yet

With South Africans forced to tighten their belts further due to a 25 basis point increase in the repo rate, it's been emphasised that there is still good financial news for consumers this festive season.

FILE: Lesetja Kganyago, Governor South African Reserve Bank (SARB), at the World Economic Forum on Africa 2017 in Durban, South Africa, 2017. Picture: World Economic Forum.

JOHANNESBURG - With South Africans forced to tighten their belts further due to a 25 basis point increase in the repo rate, it's been emphasised that there is still good financial news for consumers this festive season.

Reserve Bank Governor Lesetja Kganyago has explained that rising oil prices, and a weaker rand, have been driving inflation upwards and the monetary policy committee had no choice but to increase the rate.

In March this year, the repo rate was sitting at 6.5% and has now increased to 6.75%.

However, it's been noted that certain financial pressures have begun to ease.

Increased value-added tax, higher municipal rates and rocketing fuel prices are just some of the pressures that consumers have been facing.

However, major fuel price decreases are now on the cards, with the rand strengthening substantially against the major currencies, which should help inflation.

However, Dr Azar Jammine of Econometrix says these developments have made no difference when deciding on the repo rate.

“And that leads one to believe that the bank had, kind of, made its mind up already, prior to this decision.”

Consumers have been cautioned to pay off their debt, with some economists warning that the rate hiking cycle may not be over just yet.

(Edited by Mihlali Ntsabo)

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