Nedbank Group Economics Unit economist Liandra da Silva reckons South Africans will see at least one more repo rate hike this year.
Speaking at the Nedbank Round Table discussion held at the Nedbank campus on Monday, February 20, 2023, da Silva said that the South African Reserve Bank – which raised the repo rate aggressively in 2022, may increase it twice this year on a 25 basis point basis, before easing up again.
“With inflation close to 7%, the Reserve Bank will push for another rate hike,” he said.
Da Silva said that after this, the repo rate may remain in this range.
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Bad news for struggling SA
This is bad news for South Africans, who are hoping that the hike will stop after the last one in January this year, when Reserve Bank Governor Lesetja Kganyago delivered the first monetary policy committee (MPC) decision for the year. This is the eighth consecutive increase since policy normalization began in November 2021.
The current repo rate is at 7.25%, making the main lending rate in the country 10.75%.
Last year, the SA Reserve Bank raised rates by 75 basis points in three consecutive meetings.
The MPC meets every second month to set interest rates and will meet again in March.
Meanwhile, the country is waiting with bated breath to hear the outcome of the national budget speech to be held on Wednesday, February 23, 2023.
With the president officially declaring a State of National Disaster over the country’s energy crisis, South Africans are eager to see the allocation of funds from the fiscus, hoping to overcome the financial crisis through government efforts.
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Disaster Situations
Nedbank’s Mark Boshoff said that while the State of Disaster declaration indicated that new arrangements would be in place for funding and lending to help businesses through the energy crisis, banks did not know what they would do until Wednesday’s announcement.
When a state of disaster is declared, the government is given additional powers to deal with the crisis with bureaucratic hurdles, regulations, and other funding.