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Minister of Cooperative Governance and Traditional Affairs Des Van Rooyen. Picture Credit: Gallo Images
Van Rooyen suddenly withdraws his interdict

In another twist involving the public protector’s office‚ the Minister of Co-operative Governance an.

bank hikes rates

By unknown | Jun 13, 2008 | COMMENTS [ 0 ]



For banks, "repo" means repurchase agreement rate, which goes up 0,5percent to 12,5 percent today.

But for consumers "repo" might mean the repossession man now that the prime rate at which commercial banks base their home and other loan payments on rises to 15,5 percent, the tenth 0,5 percent increase since June 2006.

Fears of a double rate increase of 1percent were allayed yesterday when Reserve Bank governor Tito Mboweni announced the usual 50 basis point hike.

Mboweni said reports saying he would persuade the central bank's monetary policy committee which he chairs to vote for a 2percent increase had misquoted him.

He said what he meant was that interest rates may still gradually rise another 2 percent before inflation is brought under control.

"There was surprisingly little debate about alternatives to 50 basis points during our meeting," he said.

Economists had braced themselves for a bigger than usual interest rate jump after the most recent inflation data failed to show the expected improvement.

Relentless oil price rises dashed the Reserve Bank's hopes that inflation would peak at 9,3 percent in March. The consumer price index excluding mortgages used by the Reserve Bank as its yardstick came in at 10,1 percent for March and then worsened to 10,4 percent in April.

The Reserve Bank has revised its forecast for CPIX to peak at around 12 percent in the third quarter of this year. It is not expected to fall back into South Africa's targeted range of between six and three percent before the third quarter of 2010.

"We will only know what electricity tariff increase the regulator will allow Eskom next week. So this forecast has not taken electricity into account yet," Mboweni said.

Lower output from mines because of Eskom's power crunch is likely to see South Africa's already high current account deficit of around 7,5 percent of gross domestic product widen to about 9 percent when the first quarter's data is released, he said.

"The current account deficit, including that of the first quarter, has been adequately financed."

What saved consumers from a double rate hike was the recent Reserve Bank data showing higher interest rates have started to dampen spending appetite.

Nevertheless, household debt as a ratio of disposable income increased to 78,2 percent from 77,6 percent, while the ratio of debt service cost to disposable income increased from 10,9 percent to 11,3 percent from April's MPC meeting.


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