Guiding consumers since 2009

What price inflation?

By Staff Writer

The Reserve Bank's Monetary Policy Committee did not cut interest rates last Thursday the 25th of June 2009. They were widely expected to cut rates beforehand. They have been cutting rates aggressively since December 2008 in order to stimulate the economy. The reason rates were so high was due to the high inflation environment that we were in and the policy of inflation targeting to deal with it. Inflation has not come down quite enough yet and the heavy hand of interest rate manipulation is still weighing in. Interest rates and inflation have a number of implications for your personal finances including:

 

Homeloans are linked to the Prime rate which is the rate at which the Reserve Bank lends to the commercial banks at plus 3.5%. The Prime rate is generally the benchmark for your homeloan. The 3.5% gap is a convention that the commercial lenders use, but you will often be able to negotiate a Prime minus homeloan. Contact a homeloan specialist to re-negotiate your rate. Even a small rate cut can make a major difference on how much you have to pay. Your shopping basket is massively affected by inflation and food prices are a major cause of inflation. Food production takes a long time and farmers are still paying off last year's high prices this year which leads to higher food prices in the shops right now.

Your savings accounts are affected by the interest rate and as the Reserve Bank cuts rates the commercial banks will pay you less on your savings account. The whole issue of interest rates and inflation targeting is a thorny one and many folk have entered the fray from all sides of the political spectrum. There is a general disappointment at the recent lack of a rate cut, but inflation is also going to be impacted by the Eskom price hike and a slow and steady approach is probably more prudent than feel good quick cuts. Interest rate cuts are not magic bullets and they take a long time to manifest in the economy. The rate cut cycle that started at the end of last year is only really starting to show its effect now. So hang in there, things will get better.

Recent Articles

Featured Calculate your vehicle finance instalments

You’ve dreamed of a set of wheels since you can remember, and now that you’re a responsible adult with a steady income, you’re ready to take on funding to make this dream a reality. But what kind of vehicle finance options are available to you? Justmoney gives you the rundown.

Check the interest before you take a loan

Justmoney takes a look at what influences the interest rate on a personal loan, the difference between secured and unsecured loans, and its impact on the interest rate.

One retirement, so many funds – pick the right one

Saving for retirement should be one of your priorities. However, it can be confusing to choose between a pension fund, provident fund, preservation fund, or a retirement annuity if you’re not familiar with them.

Which funeral cover lays your worries to rest?

A funeral can be as expensive as R50,000, depending on the type of funeral you want. That is why purchasing funeral cover is important. However, you don’t have to accept every offer that is put on the table. Shopping around can save you a large amount of money.

Deals

Telkom August Big Deal

Price: R249 per month
When: Until 31 August
Where: Nationwide

KFC Streetwise Winter Treat

Price: R99
When: Until 30 August
Where: Online

20% off for Nedbank cardholders at aha hotels

Price: Available on request
When: Daily
Where: Nationwide