The South African Reserve Bank raised the repo rate by 50 basis points to 6.75 per cent.
Governor Lesetja Kganyago announced that in Pretoria on 28 January.
This is the first time since July 2014 that the SARB has added 50 basis points rather than the anticipated 25 basis points.
Linda Blackbeard, CEO for Randburg Chamber of Commerce and Industry said the decision is very scary.
“Everything is going to go up and more businesses can not cope,” she said.
Blackbeard said this will have a huge negative impact, the increase would see consumers paying more and more will be in debt.
According to Samuel Seeff, chairman of the Seeff Group, the decision of the Reserve Bank’s Monetary Policy Committee (MPC) to hike the repo rate by 50 basis points, taking it to 6.75 per cent (up from 6.25 per cent) and the base home loan rate beyond the 10 per cent barrier to 10.25 per cent (up from 9.75 per cent) comes as no surprise.
In the statement released by Seeff, it was said that consumers should also be aware that this is the first of more hikes to follow.
Seeff said that interest rates could rise by as much as a full 1 to 3 per cent this year, especially in the event of a credit downgrade to junk status.
He said although not good news for consumers, it does send a strong message to the international ratings agencies and investors that the Reserve Bank is serious about curbbing inflation and protecting the value of the rand.
He added that basic living and property costs will climb considerably, as will mortgage loan costs and affordability is going to be the key theme for the property market this year.
Seeff believes that although the market will absorb the rate hike, there will no doubt be a knock-on effect and the affordable and middle-income sector will feel
the effect the most.
Meanwhile, Congress of the People (Cope) is concerned about the economic hardships that most households will experience for many years to come.
Spokesperson Dennis Bloem said the price of petrol will increase next month and householders remain uncertain about the increase in electricity.
It said the sharp increase in the price of food combined with the deteriorating outlook for many farmers, small scale farmers in particular, indicate the advent of a dry white season and a winter of discontent.
Bloem said for the few who can save, the rates hike will be good news.
“For the majority, many of whom are already in debt, the outlook is very bleak. For the poor and the vulnerable, the situation is going to be dire,” he concluded.
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