High rates necessary

JOHANNESBURG – South African central bank governor Tito Mboweni said yesterday the only way of dealing with his nation’s propensity to spend was to jack up interest rates – a clear signal that policy would tighten more.

“The only way to deal with conspicuous consumption is by raising interest rates,” Mboweni said in a departure from prepared remarks, adding that while rates were high South Africa’s “sociology” did not permit for a low rate environment. “People need to get used to the fact that interest rates can go down,” without spending, he said.The central bank has raised interest rates twice since June by 50 basis points each time, reversing a cycle of unwinding that had taken rates to their lowest levels in over two decades.Combined with an emerging black middle class, the South African response was to spend, pushing up personal debt.In his prepared speech Mboweni said data showed credit demand remained robust despite the two interest rate hikes but they may take time to have an effect on borrowing.”Credit extension numbers show that consumers are still borrowing at a strong pace and there are no clear indications that demand for credit is being affected by the recent changes to interest rates,” Mboweni said in prepared remarks delivered to a business breakfast in Johannesburg.Nampa-Reuters”People need to get used to the fact that interest rates can go down,” without spending, he said.The central bank has raised interest rates twice since June by 50 basis points each time, reversing a cycle of unwinding that had taken rates to their lowest levels in over two decades.Combined with an emerging black middle class, the South African response was to spend, pushing up personal debt.In his prepared speech Mboweni said data showed credit demand remained robust despite the two interest rate hikes but they may take time to have an effect on borrowing.”Credit extension numbers show that consumers are still borrowing at a strong pace and there are no clear indications that demand for credit is being affected by the recent changes to interest rates,” Mboweni said in prepared remarks delivered to a business breakfast in Johannesburg.Nampa-Reuters

In an age of information overload, Sunrise is The Namibian’s morning briefing, delivered at 6h00 from Monday to Friday. It offers a curated rundown of the most important stories from the past 24 hours – occasionally with a light, witty touch. It’s an essential way to stay informed. Subscribe and join our newsletter community.

The Namibian uses AI tools to assist with improved quality, accuracy and efficiency, while maintaining editorial oversight and journalistic integrity.