Sarb's repo rate hike move was strong but necessary action - economist
SA Reserve Bank Governor Lesetja Kganyago announced the increase, taking the repo rate to 4.75% and the prime rate to 8.25%.
JOHANNESBURG - While economists say they expected a significant rise in the repo rate, there are concerns about the impact on South Africans battling to make ends meet.
The South African Resere Bank announced on Thursday that the repo rate had been increased by 50 basis points.
Cosatu said that it had noted the move with deep disappointment, saying that skyrocketing oil and therefore food prices were to blame and that this would not help the overall situation.
However, there's agreement that more interest rates hikes are on the cards as the reserve bank looks to curb inflation, which has moved towards the upper end of its target.
Economist Dawie Roodt said that the reserve bank has taken strong but necessary action.
"I like the 50 basis points increase because the reserve bank is making a forceful statement that they are concerned about inflation," Roodt said.
Head of fixed interests at Sanlam Investments, Mokgatla Madisha, said that more hikes were expected.
"As inflation has remained high and stick, so have the central banks become more and more hawkish, therefore the bank is also more likely to increase its rate by 50 basis points at its next meetings," Madisha said.
Nedbank economist, Isaac Matshekgo, said that the reserve bank needed to keep pace with the US federal reserve increasing its rate.
"Which in turn could bring the rand under some pressure if the South African Reserve Bank does not keep pace with those hikes," Matshekgo said.
There is consensus that more increases are still to come.
PROPERTY AGENTS OPTIMISTIC
Despite the increase in the repo rate, some property agents are still insisting that their market won't be affected.
Governor Lesetja Kganyago announced the increase, taking the repo rate to 4.75% and the prime rate to 8.25%.
He cited high electricity and fuel prices as the main drivers of inflation, saying that there was agreement in the monetary policy committee that the rate needed to be hiked.
Seeff Property Group chair, Samuel Seeff, insists that it's still a good time to buy property despite the rate increase.
He said that the hike made home loan finance a little more expensive, but the rate remained well below the pre-pandemic level and had been largely factored into the market outlook for the year.
"We don't believe that at these current rates, 8.25%, will impact too significantly on the demand for property," he said.
Seef said that the reserve bank was now in a hiking cycle as it looked to normalise the rate and there were still increases of 100 basis points expected this year.
Dr Andew Golding of Pam Golding Properties said that a 25 basis point increase would have been more prudent given the fragile state of the economy.
But he said that the impact on South Africa's residential housing market was not expected to be significant, especially as this was still the lowest prime interest rate in more than two decades.