The South African Reserve Bank’s (SARB) Monetary Policy Committee’s (MPC) decision to raise interest rates will affect the way consumers and businesses can access credit and plan their finances.
The interest rates are up by 50 basis points.
The bank has revised down its growth forecast for this year to 0.2% from an earlier 0.3%.
It has attributed the downward revision to extensive rolling blackouts, logistical constraints and an impaired supply performance in the economy.
Inflation risks have been assessed to the upside with headline inflation expected to average 6% this year due to fuel, electricity and food price inflation pressures.
The bank’s governor, Lesetja Kganyago made the rate increase announcement on Thursday.
“The South African economy contracted by 1.3% in the fourth quarter of 2022, considerably worse than expected at the time of the January meeting. The contraction was broad-based, consistent with the extensive load-shedding experienced in the final three months of the year.”
“For the whole of last year, GDP growth of 2.0% was achieved, compared to the 2.5% previously expected. For 2023, the bank’s forecast for GDP growth is lowered slightly to 0.2% from the 0.3% expected in January,” explains Kganyago.
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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.