Cape Town — South Africans waited with baited breath once again, in anticipation of the Reserve Bank's Monetary Policy Committee announcement on an interest rate hike on July 21, 2022. Everyone knew it was inevitable given the state of the world but few could have predicted a huge hike of 75 basis points, bringing the repo rate to 5.5% and the prime rate to 9%.

So as an example - if you have a new home loan of R2 million at the prime rate, the latest hike will increase payments by R950 a month. The monthly payment on that same bond has increased by almost R3,000 since November 2021, Fin24 reports.

The decision is largely based on global events, including the volatile oil price and the continuing war between Russia and Ukraine which has impacted among others, the cost of foodstuffs, wheat and cooking oil. South Africa has seen an inflation rate hike of 7.4% in June - a huge jump from 6.5% in May this year, which has also influenced the MPC's decision.

Guiding inflation back towards the mid-point of the target band can reduce the economic costs of high inflation and enable lower interest rates in the future. The Reserve Bank said in a statement that achieving a prudent public debt level, increasing the supply of energy, moderating administered price inflation and keeping wage growth in line with productivity gains would enhance the effectiveness of monetary policy and its transmission to the broader economy.

Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook. The MPC will seek to look through temporary price shocks and focus on potential second round effects and the risks of de-anchoring inflation expectations. The bank will continue to closely monitor funding markets for stress, the Reserve Bank said.

So while many South Africans are struggling to keep head above water, what is real is that loans and credit card debt has just become more expensive, not to mention car repayments and home loans, in the highest rates hike in nearly 20 years.

And this is not the end of it. More hikes are predicted for this year - yet the Reserve Bank says it is expecting stronger growth this year.