In an unexpected move last week, the Reserve Bank of South Africa (SARB) hiked interest ratesby 50 basis points to 5.5 percent per annum from 5.0 percent as of 30 January, as a result, commercial banks raised their prime lending and variable mortgage rates to 9 percent per annum from the same date.
Lezanne Human, chief executive officer of FNB Savings and Investments, says this increase brings with it an increase in the cost of servicing debt, which means that manySouth Africans will have less disposable income than before.
According to Peter Attard Montalto, Nomura research analyst, they see this hike as the beginning of a 200 to 250 basis points hiking cycle that should be completed by the middle of 2015, in fact, he says we can expect another two hikes this year and most likely in the second half.
The key motivating factor behind the decision to raise the repo rate was the deterioration in the SARB’s assessment of the inflation outlook, explains Investec’s Annabel Bishop.
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