This means that the prime lending rate of commercial banks will increase to 7.50%, and marks only the second interest rate hike in three years as inflation remains a huge concern – and despite the economy still recovering from the fourth wave of Covid-19 infections driven by the Omicron variant, said Adriaan Pask, chief investment officer at PSG Wealth.
“This tightening cycle will be different,” said Dario Perkins, an economist at TS Lombard in London. “The authorities may want to hike interest rates much quicker this time around.” “However, we have previously communicated that should the MPC decide to raise borrowing costs to contain prices, the changes will most likely be small and gradual.”Pask said that a 25 basis point hike every few months, will not be a shock for economic growth or the local market.
“The SARB’s internal quarterly projection model predicts interest rates will end 2022 at 4.9% and 5.84% by the end of 2023 – compared with our projection of 5.75%.”Reza Hendrickse, portfolio manager at PPS Investments said that the decision to increase rates reflects the committee’s view that there are upside risks to inflation, which for now is expected to be above the mid-point of the target band this year.
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