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There may be more bad news on the cards for consumers amid the rising oil prices and inflationary pressure which could lead to the South African Reserve Bank hiking interest rates.
The Monetary Policy Committee (MPC) is expected to meet on Thursday.
Brent crude oil has risen over 7% in the past 24 hour amid the ban on Russian oil.
A few countries appear to be divided with Germany and the Netherlands saying they need Russian oil.
Some analysts believe the Reserve Bank needs to be aggressive and hike the interest rate by fifty basis points while others say the hike could be twenty-five basis points.
In January, the Reserve Bank hiked rates by 25 basis point resulting in the current repurchase rate standing at 4%.
Economist Dawie Roodt told The Citizen commodity prices is going up, putting upward pressure on inflation.
“The Reserve Bank will inevitably will have to increase interest rates. There are a number of other factors that I think are also important including the number of the big central banks globally, especially the Federal Reserve in the United States, they’ve indicated that they will start taking slightly bigger steps when they start increasing interest rates.”
“That means that they may decide to start moving interest rates up by 50 basis points and not only 25 basis points. So, we have rising inflation as well as tighter monetary policy and quite significant monetary police internationally,” said Roodt.
Roodt said it is also important to note that the Reserve Bank has indicated a number of times already that they would like to see the inflation targets lowered.
“I am of the view that the sooner they start increasing interest rates, the fewer rates increases will be necessary and I really do hope that the Reserve Bank is going to go for 50 basis points because the sooner they do that the less there will be eventually.”
Roodt said the interest rate hike will also affect savers.
It’s not only consumers, its savers, they will be impacted positively. Every one rand that is borrowed in the economy is saved by somebody else and we have had the last couple of years a relatively low interest rate environment and especially the elderly that are dependent on interest income, they’ve been having a difficult time.”
Meanwhile, while the petrol price remains high it will not get to R40 per litre, following the spike in international crude oil prices, unless the oil price reaches $150 per barrel and the rand loses a lot of its value very suddenly.
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