27 May 2022

Increased Repo Rate and Oil Prices concern consumers

Submitted by Tony Seifart

The South African Reserve Bank’s Monetary Policy Committee met again on 19 May 2022 to discuss the REPO lending rate.

Consumers are already under pressure from inflation across the board and the adjustment of 50 basis points adds to negative sentiment. A shift upwards will create further strain, coupled with record high fuel prices.

A Reuters Poll before the meeting showed that 16 out of 24 analysts correctly predicted an increase of 50-basis points. To put this in perspective, a 50-basis point increase will result in an increase of R415 per month on repayments for every R1million owed.

International Oil Prices and a weakening of the Rand against the US Dollar has caused record-setting fuel prices. This is set to be even more of a challenge when the fuel prices are adjusted on the first Wednesday of June 2022.

The under-recovery (cost price of fuel less the price consumer is paying), will translate to almost R2 extra per litre on petrol. Added to this is the end of the temporary relief of the R1.50 per litre fuel levy introduced by Finance Minister Enoch Godongwana, which could see petrol increase by as much as R3 per litre on 1 June.

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