Are South African interest rates unnecessarily high as one economist claims? Other economists say the South African Reserve Bank is maybe sometimes over-enthusiastic when it comes to rates, but it also keeps consumers from taking up unnecessary debts and it definitely benefits people with savings.that South Africa’s interest rates do not need to be as high as they currently are.
“The MPC noted in the past that it tends to look through the first-round shocks of inflation and will act when second-round effects take hold on the economy, such as when food and fuel pressures broaden out to the remainder of the economy and labour and businesses adjust prices upwards in response to a rise in cost-of-living pressures.”
“As inflation softened, reacting to these higher interest rates, the positive gap in real rates widened. These central banks then had to start loosening policy earlier to reduce real rates to a level that was more accommodative for growth. South Africa hiked rates later than these economies and to a lesser extent arguing for a shallower and later interest rate cutting cycle in SA.