| A blow for indebted South Africans. The Reserve Bank's Monetary Policy Committee has raised the repo rate at which it lends to commercial banks by 25 basis points to 6 percent. That means the Prime lending rate that affects most consumers rises to 9 and a half percent. The bank is acting pre-emptively because inflation is expected to breach it's targeted ceiling of 6 per cent by next year.
Raising interest rates has the effect of ensuring there is less money in people's pockets which means less spending and a slower rate of price increases. The problem is that higher rates can also curb economic growth.
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