And the plot thickens… December 6, 2007
Posted by Cobus in Economy.add a comment
South African Reserve Bank governer Tito Mboweni’s anouncement of the 50 basis points interset rate hike earlier today might not have been such a surprise, albeit for South Africans this means tightening their belts even further… Fin24’s article, “Rates horror continues” states that Tito Mboweni took the spirit out of Christmas shopping for many borrowers when he raised interest rates by another 50 basis points.
The introduction in the Statement of the Monetary Policy Committee released earlier today starts off with the typical fuzzy economic jargon:
The short-term inflation outlook has deteriorated since the previous meeting of the Monetary Policy Committee. Food and energy prices have maintained pressure on inflation and these pressures are expected to persist in the coming months. At the same time, previous monetary policy actions are probably beginning to have an impact on household consumption expenditure and this is expected to help moderate inflation pressures over time. The MPC however has to ensure that the short term impact of higher inflation does not allow inflation expectations to become entrenched at higher levels.
After elaborating on recent developments in inflation and the outlook for inflation, the statement conludes with:
The assessment of the MPC is that the balance of risks to the inflation outlook continues to be on the upside. Therefore the MPC has decided to adjust the repurchase rate by 50 basis points to 11,0 per cent per annum with effect from Friday, 7 December 2007. The MPC will continue to monitor relevant developments and take the necessary steps to ensure that inflation returns to within the target range.
Bottom line: The repo rate (the rate at which the Reserve Bank lends money to commercial banks) increases to 11% and the prime lending rate to 14.5%.
Suggestion: Don’t incur new debt and carefully watch your spending patterns… The result of the rate hike means an increase in repayments on bonds, vehicles and other debt and in turn less disposible income… Do the math… don’t shoot yourself in the foot.
