Economists expect SA Reserve Bank to hike reop rate to keep inflation in check

There is consensus that the South African Reserve Bank will increase the repo rate on Thursday afternoon, with the only question being by how much.

South African Reserve Bank (Sarb) Governor Lesetja Kganyago. Picture: @SAReserveBank/Twitter

JOHANNESBURG - There is consensus that the South African Reserve Bank will increase the repo rate on Thursday afternoon, with the only question being by how much.

South Africa is among several countries that have seen inflation increase due to various factors, including the war in Ukraine.

Stats SA said annual inflation was recorded unchanged at 5.9% for April but this was still at the upper end of the reserve bank’s target of between 3% and 6%.

There has been varied opinion about whether the monetary policy committee will increase the repo rate by 25 or 50 basis points.

Economist Bonke Dumisa said that what was clear was that South Africans in debt would need to adjust their budgets.

"We do expect that the home loans will go up from Friday, the car instalments for most people are flexible," he said.

Economist Dawie Roodt said despite its impact on the pockets of many South Africans, the increase in the repo rate would be beneficial in future.

"A high interest rate is much better than high inflation if it becomes entrenched in the economy, so it will be painful in the short term. The reserve bank, by increasing the interest rate, is taking the right steps," he said.

It appears the next few months will be difficult for most people as the price of fuel is expected to increase further in June.