The Reserve Bank has raised the repo rate and prime lending rate to bring inflation under control, forcing indebted consumers to dig deeper into their pockets.
On Thursday, the Monetary Policy Committee (MPC) decided to increase interest rates to 50-basis. The move takes the repo rate to 7.75% and the prime lending rate to 11.25%.
The decision comes as the country continues to grapple with elevated levels of inflation and a contracted economy.
The MPC has increased rates eight times since November 2021.
Reserve Bank Governor, Lesetja Kganyago says, “Against this backdrop, the MPC decided to increase the repurchase rate by 50 basis points to 7.75% per year, with effect from the 31st of March 2023. Three members of the Committee preferred the announced increase. Two members preferred a 25 basis points increase. The revised repurchase rate is now less accommodative and is more consistent with the current view of risks to inflation.”
Consumers under pressure
South African consumers continue to be under pressure on the back of the higher cost of living, made worse by the fact that, on average, wage increases have failed to keep up with inflation.
Many households have resorted to debt in order to cope with a lack of financial resources.
And, as the cost of debt servicing has steadily increased due to the imposition of higher interest rates, this is putting additional strain on consumer pockets.
Inflation has been running rampant in recent years, with last year seeing inflation prints close to 8%. It’s an enemy, particularly to the working class pocket, as it diminishes the value of money. And the evidence on the ground is showing that those with lower income and irregular cash flows are really struggling to keep their heads above water, with even concerns that some South Africans are literally going to bed hungry, because of the higher cost of living.