HILARY JOFFE: Plugging the gaps and plumbing the monetary policy pipes
So the US Federal Reserve has hiked interest rates by 50 basis points, with more to come as it races to tackle runaway inflation — which it failed to anticipate. Our own central bank is also expected to raise rates again in May as inflation heads higher, even if it has at least done better on the anticipation side and can move more gradually.
The way it works is that when the central bank increases the so-called policy rate — in SA’s case the repurchase or repo rate — the commercial banks then raise the rates at which they lend to households and businesses, which cuts disposable income, curbing demand across the economy and so putting downward pressure on prices, taming inflation...
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