The SA Reserve Bank has raised interest rates by 75 basis points.
The interest rate hike effectively increases the cost of servicing credit and will see consumers paying more to service debt, which includes credit cards, car, home, personal loans, among other things.
As consumers will have less cash to spend, businesses will suffer from decreased demand and some might be forced to retrench workers or close down.
The Reserve Bank has between November 2021 and September raised the repurchase rate - the rate the Reserve Bank lends to commercial banks - six times from 3.75% to 6.25% in a bid to curb the runaway inflation, which for August sat at 7.6%.
The inflation was mainly skyrocketing due to the rising fuel and wheat prices, mainly caused by the war between Russia and Ukraine.
The hefty interest rates hike flies in the face of trade unions who were pleading with the Reserve Bank to either not raise interest rates or raise them gradually by 25 basis points, for instance.
Trade unions had argued that raising interest rates by 75 basis points would leave households with little cash to spend and, as a result, businesses would be negatively impacted.
When delivering the decision of the Monetary Policy Committee on Thursday, Reserve Bank governor Lesetja Kganyago said: "The level of the repurchase rate is now closer to the level prevailing before the start of the pandemic.
"The revised repurchase rate path remains supportive of credit demand in the near term, while raising rates to levels more consistent with the current view of inflation risks. The aim of policy is to anchor inflation expectations more firmly around the mid-point of the target band and to increase confidence of hitting the inflation target in 2024," said Kganyago.
Reserve Bank governor Lesetja Kganyago delivers a hefty interest rate hike
Image: PUXLEY MAKGATHO
The SA Reserve Bank has raised interest rates by 75 basis points.
The interest rate hike effectively increases the cost of servicing credit and will see consumers paying more to service debt, which includes credit cards, car, home, personal loans, among other things.
As consumers will have less cash to spend, businesses will suffer from decreased demand and some might be forced to retrench workers or close down.
The Reserve Bank has between November 2021 and September raised the repurchase rate - the rate the Reserve Bank lends to commercial banks - six times from 3.75% to 6.25% in a bid to curb the runaway inflation, which for August sat at 7.6%.
The inflation was mainly skyrocketing due to the rising fuel and wheat prices, mainly caused by the war between Russia and Ukraine.
The hefty interest rates hike flies in the face of trade unions who were pleading with the Reserve Bank to either not raise interest rates or raise them gradually by 25 basis points, for instance.
Trade unions had argued that raising interest rates by 75 basis points would leave households with little cash to spend and, as a result, businesses would be negatively impacted.
When delivering the decision of the Monetary Policy Committee on Thursday, Reserve Bank governor Lesetja Kganyago said: "The level of the repurchase rate is now closer to the level prevailing before the start of the pandemic.
"The revised repurchase rate path remains supportive of credit demand in the near term, while raising rates to levels more consistent with the current view of inflation risks. The aim of policy is to anchor inflation expectations more firmly around the mid-point of the target band and to increase confidence of hitting the inflation target in 2024," said Kganyago.
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