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The Reserve Bank hikes interest rates 0.25%

by , 19 November 2015

Earlier today, the Reserve Bank's monetary policy committee revealed that it was hiking interest rates.

This comes as the majority of economists seemed to believe that the bank would hold off hiking rates for the moment.

Let's take a closer look at the Reserve Bank's decision…

An interest rate hike takes prime to 9.75%

This afternoon, the governor of the Reserve Bank, Lesetja Kganyago, revealed that the monetary policy committee decided to raise interest rates by 0.25%, reports Fin24. This brings the repo rate to 6.25% and “the prime lending rate to 9.75%”.
The announcement may have come as a surprise to some as a number of polls showed that the majority of economists expected rates to remain unchanged.
Mr Kganyago said the committee made this decision based on “the inflationary outlook and SA’s deteriorating economic situation,” says IOL. The rate hike will help to stem inflation from spiralling higher.

Inflation is a concern to the Reserve Bank

The pressures on inflation have been increasing, says MoneyWeb. This is thanks to a “worsening drought,” a weaker rand and the chance of power tariff hikes next year.
Whilst the central bank acknowledges that the country is struggling to grow its economy, it doesn’t “expect the economy to go into recession,” reports the SABC
The governor said inflation in the first quarter should now average at 6.4%, not the 6.7% previously anticipated, adds IOL. For 2016 and 2017, inflation is likely to average at 6% and 5.8% respectively.
The last interest rate hike was in July, notes BDLive. The monetary policy committee aren’t due to meet again until next year.
So today’s news may be good news for savers, but for those heavily indebted, their repayments just got more expensive.
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The Reserve Bank hikes interest rates 0.25%
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