Economist Goolam Ballim says South Africans who have not been able to rejoin the workforce due to the negative financial impact of the COVID-19 pandemic could experience a further strain on their pockets amid the latest interest rate hike.
The South African Reserve Bank’s Monetary Policy Committee this week announced an increase in rates by 25 basis points.
Reserve Bank announces interest decision: 27 January 2022
It takes the repo rate to 4% and the banks’ prime lending rate to 7.5%.
“The tragedy is that at least 1.5 million people have not re-joined the labour force after the shock job losses in Quarter 2 of 2020. The Reserve Bank raising interest rates will also suggest that is going to crimp wallets because servicing costs will rise but the Reserve Bank is also fearful of inflation expectations rising and high inflation becoming sticky or enduring. So by raising interest rates, it wants to anchor inflation expectations so that even though we have this drive in inflation over the last year, it will be temporary,” says Ballim.
#MPCJAN22 pic.twitter.com/LT44L9W4in
— SA Reserve Bank (@SAReserveBank) January 27, 2022
Reaction to Reserve Bank repo rate increase decision:
