SARB to reveal repo rate decision amidst divided economists

The South African Reserve Bank (SARB) is set to make a critical announcement Thursday afternoon regarding its decision on the repo rate, leaving economists split on whether the Monetary Policy Committee (MPC) will opt to pause rate hikes or implement a 25 basis point increase.

The central bank’s decision is being closely monitored as the nation grapples with economic uncertainties amidst the impact of the global pandemic and other domestic challenges.

With inflation playing a crucial role in the MPC’s decision-making process, the better than expected inflation rate could potentially offer some leeway for the committee to refrain from raising rates to levels witnessed in previous sittings.

Some economists speculate that the SARB may choose to keep interest rates steady, partially influenced by the US Federal Reserve’s decision to pause its interest rate hike cycle at its June meeting.

Conversely, another group of analysts predicts that the SARB will opt for a 25 basis point hike, pushing the repo rate to 8.5%. Such a move could prove burdensome to indebted consumers, who have already experienced the cumulative impact of a 4.75% interest rate increase during the current hiking cycle.

Retail trade remain depressed, indicating consumers under pressure


Debt repayments

The consequences of high interest rates are two-fold: it elevates debt repayments, placing additional strain on already financially constrained households, while simultaneously benefiting savers, who stand to earn more in interest.

The SARB utilises the repo rate as a vital tool in its ongoing efforts to curb inflation, which has persistently remained above the target bracket of 3 to 6% for nearly two years.

As the country continues to grapple with economic challenges, the MPC faces the delicate task of striking a balance between stimulating economic growth and managing inflationary pressures.

Recent consumer inflation data from StatsSA has provided some positive indications, revealing a slowdown to 5.4% in June. However, analysts remain cautious as various external and internal factors continue to influence the economic landscape.

Nearly half of South Africans face financial distress, relying on unsecured debts