Economist warns against an interest rate increase

The government has already pushed the population to the edge; any further increases will in reality result in mass nonpayment. The country as a whole will be the only real loser. be far better to force Banks and other institutions to tighten their lending criteria and stop handing out loans the way they do.
 
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Bad Ballie said:
The government has already pushed the population to the edge; any further increases will in reality result in mass nonpayment. The country as a whole will be the only real loser. be far better to force Banks and other institutions to tighten their lending criteria and stop handing out loans the way they do.
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A 25bp hike on a R1m bond over 20 years is about R168 a month, prime 10.50% to 10.75%. That alone breaks nobody.

The catch is that SARB may not have a choice. The Fed decides tonight and is expected to hike for the first time since 2023. If we don't match it, the rand usually weakens, because higher US rates pull capital out of ZAR assets and into dollar ones. So you end up paying through inflation instead, which is worse.
 
Stiggs said:
A 25bp hike on a R1m bond over 20 years is about R168 a month, prime 10.50% to 10.75%. That alone breaks nobody.

The catch is that SARB may not have a choice. The Fed decides tonight and is expected to hike for the first time since 2023. If we don't match it, the rand usually weakens, because higher US rates pull capital out of ZAR assets and into dollar ones. So you end up paying through inflation instead, which is worse.
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Correct a bond on its own won't break many people, but a lot of people have, post covid, found themselves heavily in debt with multiple loans and HP agreements all of which get affected. The vast majority of people already scrape by hand to mouth; any extra debt will break them. The mind set has always been, "it's a temporary glitch which will correct itself" but with covid many people suddenly found themselves providing financially for extended family at people lost their jobs and income, the collapsing economy and rising prices since then, and government demanding more tax and not adjusting tax brackets etc., also play a significant role. Otherwise, intelligent and rational people are now finding it difficult to just break even. Like it or not, when the choice is food on the table and a roof over your head or paying debt, people will not pay the debt.
 
Bad Ballie said:
Correct a bond on its own won't break many people, but a lot of people have, post covid, found themselves heavily in debt with multiple loans and HP agreements all of which get affected. The vast majority of people already scrape by hand to mouth; any extra debt will break them. The mind set has always been, "it's a temporary glitch which will correct itself" but with covid many people suddenly found themselves providing financially for extended family at people lost their jobs and income, the collapsing economy and rising prices since then, and government demanding more tax and not adjusting tax brackets etc., also play a significant role. Otherwise, intelligent and rational people are now finding it difficult to just break even. Like it or not, when the choice is food on the table and a roof over your head or paying debt, people will not pay the debt.
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Everyone agrees higher interest rates are bad for people in debt. My reply was to your argument that "the country as a whole will be the only loser" if SARB raises rates. I'm saying more people are impacted by higher inflation than higher borrowing rates. Not raising rates likely sees the Rand depreciate, causing everything to be more expensive. The SARB is trying to keep prices under check. That is their primary goal with raising rates, doing what's best for most of the country.
 
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