Reserve Bank hike hurts all

Eric Naki

Eric Naki

South African consumers are in for more hard times after the Reserve Bank's Monetary Policy Committee (MPC) decided to hike the repo rate by 50 basis points.

An across-the-board outcry has erupted against the news because the banks have no choice but to raise interest rates in response to the increase. This will place the lending rate at 10percent. The repo rate is the lending rate by which the central bank lends to the commercial banks.

First National Bank wasted no time in announcing that it will raise its prime lending and home loan rates by 0,5percent from 13percent to 13,5percent with effect from Monday.

Cosatu reacted with anger, saying the increase will worsen the plight of workers and the poor.

The DA said the increase will certainly be passed on by the banks and "will be keenly felt by hard-pressed consumers".

The MPC move is in line with a prediction by a Reuters poll of 16 economists last week that the the Reserve Bank will increase the repo rate by a half percentage point. Other banks could not be reached at the time of going to press, but most will probably raise their rates.