MARK BARNES: Interest rates can only do so much, the rest is up to SA Inc
Such a brutal instrument will not succeed in lifting the economy out of its quagmire
27 July 2022 - 15:03
The application of monetary policy is a complex function that often expresses the outcome of its deliberations in simple prescriptions, like setting interest rates. The latest 75 basis point increase in the repo rate from 4,75% to 5,5% will have the effect of increasing debt servicing costs by well over 10% as all interest rates adjust in response.
The rand-dollar exchange rate (sometimes proffered as the country’s “share price”) appreciated quite nicely in anticipation of the move and the hawkish outlook it ushers in, but even this heavy dose of medicine may not be enough...
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