EDITORIAL: Solid cases for 50 and 25 basis point hikes

The rand’s recent rally is one of the key reasons that 25 basis points is looking feasible, but it’s not the only one Picture: 123RF/skorzewiak

SA didn’t move quite as early to contain rising inflation as did some of its emerging market peers such as Brazil, but the Reserve Bank intervened fairly early. It has raised rates by a cumulative 350 basis points since the start of the hiking cycle in November 2021. The recent hikes have been 75 basis points. Now at last it can start to taper off the increases — though when it can pause, and when it can start cutting rates again are questions that are the subject of hot debate among economists.

The rand’s recent rally is one of the key reasons that 25 basis points is looking feasible, but it’s not the only one. Inflation came in slightly below expectations for December, at 7.2% compared with the 7.3% consensus forecast. A particularly good sign was that core inflation also came in lower, thanks in part to slowing housing costs.

The trouble is, though, that the electricity crisis means the economy can’t grow much faster anyway, so low growth doesn’t necessarily help at all to contain inflation. And there are growing signs that load-shedding itself could exert price pressures, disrupting supplies and raising costs for producers and retailers. That’s without even factoring in the 18.6% tariff hike the regulator has granted Eskom that could add 0.3% to the inflation rate.

HajraOmarjee Any rise in the interest rate is not as SOLID as you describe because our inflation is structural, systematic and is NOT caused by the consumer, who is punished unjustly.

Ramaphosamustfall phalaphalafarmgatecriminal must fall!

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