Message from the MD - April 23
Category Newsletter: Message from MD
Although everyone expected a hike in the repo rate last week, not many expected the 50-basis point 'surprise'. With three members of the Monetary Policy Committee voting for the 50 point increase and the remaining two opting for the more conservative 25 points, Reserve Bank Governor, Lesetja Kganyago emphasised that this was done to reign in the inflation rate, currently sitting at 7,0%
I also believe this drastic step was taken on the back of the recent quarter percent interest rate hike by the Federal Reserve in the US, where the possibility of a banking crisis was cited as one of the reasons for the hike. If the crisis in the banking sector can be contained this can lead to a stabilisation in inflation which in turn can lead to possible reductions in interest rates at the end of 2023.
South Africans are not the only ones who need to tighten their belts in an attempt to get through the month financially. With our inflation at 7% we are slightly below the 2022 global average inflation rate of 8,8% There are many first world countries who enjoyed historically low interest rates which are now struggling to service debt as their interest rates have crept closer to double digits over the past year.
We have experienced favourable interest rates since mid-2020 and I believe that we have now reached the crest of the current interest rate cycle. We should see the inflation rate decrease in coming months which will inevitably lead to a reduction in interest rates shortly thereafter.
Author: Nico Louw
