100 bps rate hike on the cards?

[Nod]

From Fin24:

Global analysts Lehman Brothers wondered out loud on Friday morning whether some notably hawkish statements by central bank governor Tito Mboweni on Thursday might be a signal that a rate hike of 100 basis points could be on the cards come June 12.

After dissecting the speech, the analysts say there was an "interesting reference" in the middle to taking unusual action, which they say is perhaps indicating a chance of a 100 basis point move.

"While he reiterated that price pressures were more generalised and that expectations were a concern, he did go further in some areas. He said that wages did not bode well for inflation, an interesting comment given the ArcelorMittal wage settlement earlier in the week."

The National Union of Metalworkers of South Africa (Numsa) said on Monday that ArcelorMittal (ACL), the world's largest steel producer, had agreed to a 12% wage increase across the board.

 

[icyrus]

I guess they'll just keep pushing the button, hoping for a different outcome this time.

 

[eltherza]

this would suck

 

[CathJ]

Having more cash in the bank than debt, this is a good thing for me (although it's bad for me too, in the bigger scheme of things).

What I've wondered is, shouldn't the prime interest rate always be ahead of inflation? Currently, even on a large investment, the interest rate you get at the bank is only just ahead of inflation, so while you think you're making money on interest you actually aren't, in real terms. I don't know enough about economics and all that; wouldn't there be repercussions if prime was less than inflation? Doesn't that mean that they have to increase interest rates for that reason alone (apart from discouraging debt, and increasing foreign investment)?

 

[DJ...]

I would like to see some quantifiable evidence of recent rate hikes having the intended negative affect on CPIX and PPI. Once they can do this, then I will believe that this is a necessity or even a step in the right direction.

 

[DJ...]

Having more cash in the bank than debt, this is a good thing for me (although it's bad for me too, in the bigger scheme of things).

What I've wondered is, shouldn't the prime interest rate always be ahead of inflation? Currently, even on a large investment, the interest rate you get at the bank is only just ahead of inflation, so while you think you're making money on interest you actually aren't, in real terms. I don't know enough about economics and all that; wouldn't there be repercussions if prime was less than inflation? Doesn't that mean that they have to increase interest rates for that reason alone (apart from discouraging debt, and increasing foreign investment)?

Hence the reason they set a target CPIX and PPI range, however national savings rates in SA are abissmal at best and therefore we can assume that the rate hike affects the lending market more than the savings one...

It does make sense to maintain prime above infation from the savings perspective, but this is not an official mandate of the reserve bank AFAIK. They are more concerned with the lending issues...