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Repo Rate Increases Have Begun

After a long pattern of Repo Rate drops to historic lows during the pandemic, this month heralded the first of many predicted increases over the next 24 months.

It has been a long time coming and though the first rate increase is a small one, it sends the signal that the long feared increases have finally begun.

This month the Reserve Bank’s Monetary Policy Committee (MPC) announced a 25 base point increase (which then has a knock on effect to those making use of credit).

Repo Rate: 3.75%

The decision to begin pushing the rates up was not a unanimous one but it is a case of the majority rule on the MPC so the votes leaned towards an increase now rather than only in the new year.

As the interest rates go up, all your (linked) credit repayments have to increase. This can place already stretched consumers under added pressure to make their increased monthly debt repayments.

More Rate Increases Coming in 2022 & 2023

The SARB MPC has said that a pattern of increases lies ahead as they now slowly begin to increase the rate. They have indicated that this could be a series of gradual increase over the next 2 years (rather than any sudden big jumps). Many similar economies such as Russia, Brazil, Poland and Hungary have also begun to raise their rates this month.

The markets reacted predictably with the Rand seeing a sudden dip verse the US Dollar and other currencies. Some economists are guessing the Rand could begin to drop down to R16 to 1 US$ over the end of the year.

 

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