SA Reserve Bank worried about wage hike spiral, say economists
The effects of high inflation have been highlighted as the main reasons that the reserve bank has moved to hike the repo rate, and included in this are increased wage levels.
- South African Reserve Bank
- Repo rate
- Inflation
- Rising cost of living
- Interest rate
- Wages
JOHANNESBURG – Economists have noted that the South African Reserve Bank (Sarb) is worried about wage levels as inflation continues to climb.
The monetary policy committee has raised the repo rate by 75 basis points, with Governor Lesetja Kganyago saying that they had no choice but to take action against rising inflation.
This brings the prime lending rate to 9%.
The effects of high inflation have been highlighted as the main reasons that the reserve bank has moved to hike the repo rate, and included in this are increased wage levels.
Citibank’s Gina Schoeman said that the reserve bank was worried about this.
“They spoke a lot about wages but for the first time in a long time they’ve started to emphasise the risk of a wage hike spiral,” Schoeman said.
Chief economist at Stanlib Asset Management, Kevin Lings, agrees, also noting concerns about increased wages, which he said would have a knock-on effect.
“Once wages start to go up then you start to embed a much higher price increase and before you know it, prices are generally going up at that level,” Lings said.
They agree that higher wages will also present a problem in the fight to get inflation under control.
