As South Africans were able to start the year of with some financial relief coming in the form of a fuel price cut, the reprieve may be short-lived as the South African Reserve Bank’s Monetary Policy Committee (MPC) is set to meet later this month to make a decision on the repurchase rate (repo rate) for the country.
The members of the MPC will meet between 24 – 26 January, with the SARB governor, Lesetja Kganyago, making the announcement on the final day of the meeting.
After a series of aggressive rate hikes last year, economists are predicting that the SARB will raise the rate by 50 basis points in January 2023.
This follows consumer price inflation easing since it peaked at a 13 year high of 7.8% in July 2022.
Another decline to 7.4% in November likely provided some comfort to the Monetary Policy Committee, suggesting they will step back from aggressive 75 basis point moves delivered at the past three meetings, like the U.S. Federal Reserve, according to Reuters.
According to Reuters, the MPC raised rates by 350 basis points since November 2021 and will raise the repo rate by another half-point in total to 7.50% by the end of March, according to 9 of 12 economists. The MPC meets in January and in March.
The repo rate in South Africa is currently 7.00% and a 50 basis point increase will take it to 7.50%.
The prime lending rate in the country currently sits at 10.50%, and if the Reserve Bank hikes it by a further 50 basis points at their January meeting, it will then take the prime lending rate to 11%.
In December 2022, Momentum Investment’s Consumer pulse told Business Report that consumers’ pockets will remain constrained in the coming quarters given persistent core inflation pressures and the anticipated further interest rate hike by the SA Reserve Bank (SARB) in January.
The SARB was expected to hike the repo rate in an attempt to anchor inflation, with expectations at the mid-point of the target range.
Meanwhile, talking about the fuel price decrease, Debt Rescue CEO Neil Roets says that although any financial relief is good news for South African consumers, it is small comfort to the millions of families who are heading into 2023 in a far worse position financially than in 2022.
He notes that with each petrol price increase in 2022 we have seen the second round inflationary pressures add up and hit consumers with a cost of transport increase, in addition to the increase that is passed on from retailers who need to transport food to their stores – yet, previous drops in fuel prices during 2022 did not see a subsequent drop in food prices.
Food price inflation went in the opposite direction.
“With 81% of South African households now fighting a daily battle to put enough food on the table, what respite can authorities offer, to give people some hope for the future,” Roets said.
BUSINESS REPORT