The content on this page is not written by Polity.org.za, but is supplied by third parties. This content does not constitute news reporting by Polity.org.za.

UASA notes with concern the South African Reserve Bank’s (SARB) Monetary Policy Committee’s (MPC) decision to increase the repo rate following the recent rise in consumer price inflation (CPI) to 4%.

The SARB hiked the repo rate by 25 basis points to 7% and the prime interest rate of banks to 10.5%. This is the first interest hike since May 2023.

The SARB forecast now has headline inflation averaging 4.4% this year and 3.7% next year, before returning to the 3% target in 2028.

As hopes for a quick end to the Middle East conflict have slowed, SARB Governor Lesetja Kganyago said the conflict is putting downward pressure on global economic growth, while inflation is rising.

Sadly, the impact of the repo rate increase on consumers with various loans, such as home, vehicle(s), and credit cards, means new repayment amounts based on the announced increase. The increases add pressure on fuel prices, which have been sharply hiked since March, as well as on other inflation-linked costs.

The elevated uncertainty may also affect future interest rates. The SARB outlined three scenarios:

·       Prolonged Middle East crisis, leading to higher food and oil prices, plus a weaker rand.

·       The El Niño weather pattern, which brings drought to South Africa.

·       Non-linear effects, i.e., big shocks that affect inflation.

Considering the challenging economic outlook ahead, UASA encourages its members and all consumers to be cautious of their finances and make positive financial decisions that can help them going forward.

Issued by UASA spokesperson Abigail Moyo