Interest rate hike to hurt indebted consumers: Expert

Chief Economist at Econometrix Azar Jammine says the latest rate hike will hurt indebted consumers but says the current rates are not too different from the levels prior to the pandemic.

Jammine’s comments follow the Reserve Bank’s decision to increase the repurchase rate to 6.25% and the bank’s prime lending rate to 9.75%.

The bank cited upside risks to the inflation outlook as the main reasons for the 75 basis point rate hike.

“Any increase in interest rates hurts the average consumer, but of course, yes, interest rates may be rising, but they’re not rising to astronomical levels and the second point to make in that regard is that the average consumer is beginning to borrow more money to help pay his way and in the short-term, that should help to prevent the consumer spending from sliding too rapidly.”

VIDEO | DISCUSSION: Reserve bank hikes repo rate by 75 basis points to 6.25% per year:

[embedded content]

The Reserve Bank has revised down its growth forecast for the country, with economic growth now expected to reach 1.9% from 2% this year.

“Our current growth forecast leaves the output gap broadly unchanged. The output gap is still expected to turn positive in the second quarter of 2023.  After revisions, the risks to the medium-term domestic growth outlook are assessed to be balanced. While negative global shocks and load shedding will continue to create headwinds to growth, household spending and investment are more supportive.”

Repo Rate highlights and analysis with Owen Nkomo[embedded content]

Share article

Source: SABC News (