Rate hikes: Expect more

The prime overdraft rate thereby increases to 15% and the current tightening cycle, which began in June last year, goes to 450 basis points.

ETM market analyst Russell Lamberti said Reserve Bank governor Tito Mboweni had very little choice: "They are clearly concerned about the current rate environment.

"What we probably will see, and we are already starting to see now in the fixed income market, is that investors are starting to push out their expectations of when this cycle is going to peak.

"After what we heard today, I am still expecting another rate hike in June or August, given the way Mboweni was talking how the Bank has reacted to the electricity price increases, and how we can see inflation into double digits.

"I won't be surprised to see another hike in June."

Nedbank economist Nicky Weimar said there were enough reasons not to hike the interest rate, but inflation concerns won at the end of the day: "It will be interesting to see how the rand reacts to this news.

"Our view is that this is one last effort to stamp out inflation, we don't believe there would be any more interest rates hikes."

T-Sec economist Mike Schüssler said the rate hike was what he expected: "The increase is not good for growth, but it sends the right message that we are still fighting inflation.

"While it is bad for short-term rates, it may good for rates in the longer term - longer-term rates may come down, since people are more likely to tighten their belts."

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