The the latest repo rate hike of 25 basis points to 6.25% by the SA Reserve Bank (Sarb) prompts the question as to how South Africans - who are already under financial pressure - are going to deal with this, especially when it comes to their investments and savings, according to Jeanette Marais, director of distribution and client service at Allan Gray.While inflation remained relatively unchanged in October, SARB's Monetary Policy Committee (MPC) noted that it is likely to trend up, due to the depreciating rand, the worsening drought conditions and its likely impact on food prices, and the possibility of additional electricity price increases.
"While a higher interest rate environment may ensure a better return on one’s hard-earned rands, inflation, if not taken into account, can have a devastating impact on one’s savings. Rising interest rates must be looked at in conjunction with inflation, to ascertain the real impact on one’s savings," explained Marais.
"Many people think that the cash that they put away will grow by the interest rate. But, they fail to account for the eroding effect that inflation has on their savings." Read More>>>