Economists related their optimism over the rise of the rand by the end of the day after it strengthened against major currencies last week.
Looking at the statement made by the South African Reserve bank seems to be a sigh of hope for the country’s currency which has been facing sharp down falls over the past weeks.
The South African Reserve Bank announced that the repo rate would increase by 50 basis points to curb inflation.This means the repo rate, which is the rate at which the Sarb lends money to banks, will rise to 6.75%.
According to the bank, this will help to cushion the rand back to it feet. It has regained major ground against the dollar, pound and euro, following huge loses late last year.
Speaking further on this, South African Reserve Bank (Sarb) Governor, Lesetja Kganyago explained that inflation needed to be kept in check and the bank had no choice but to increase the rate.
Firing of Finance Minister Nhlanhla Nene late last year alongside various international factors,was alleged to be the cause for the fall of the local currency into a tailspin. Banks were said to be among those hardest hit when President Jacob Zuma changed finance ministers .
According to eyewithnessnews, last week gave a different picture of the economy as the financial sector ended the week on a high and banking shares making gains.
Banking stocks normally benefit from a rise in interest rates, as banks earn more from their investments. However, as those in debt face more pressure, hopefully a stronger rand will bring some good news with lower inflation.
Economist therefore appreciated the reserve bank for taking the decision to increase the interest rate.
To them, the hike will be beneficial to everyone especially the poor as the cost of food would be reduced to some extent while the rich will still benefit from a higher pay out on their investments.
Obviously, if this continues in a steady rate, the hope of achieving 1.6 per cent in the next two years is achievable.