The bright side of the Reserve Bank’s decision to hike rates

WHILE the South African Reserve Bank’s latest decision to raise interest rates by 50 basis points will undoubtedly put pressure on debt holders, there are definite positives to the move, says Thalia Petousis, portfolio manager at Allan Gray.

One positive is that the higher rate makes South Africa a much more attractive destination for investors, Petousis said. Another is that it shows that South Africa’s central bank is not asleep at the wheel when it comes to executing its mandate.

On the first point, Petousis said that the South African money market is fast becoming a saver’s haven.

“The overnight repo rate of 7.75% as at end-March is in fact its highest level in almost 14 years. Per the SARB, the extent to which it will keep adjusting the repo rate higher will depend on how confident it is that SA consumer price inflation (CPI) is getting closer to its