IEJ warns higher policy rates may lead to higher unemployment
IEJ says the increase in the policy rate will have a significant impact on the employment rate
The Institute for Economic Justice (IEJ) has issued a warning that the Reserve Bank's decision to increase the policy rate may result in higher unemployment rates within the country. The Monetary Policy Committee has recently decided to hike the policy rate by 25 basis points, now standing at 7.25%. Consequently, the prime lending rate has also risen to 10.75%.
Liso Mdutyana, a junior researcher at the IEJ, has expressed concern that the increased policy rate will result in higher borrowing costs for businesses. This surge in borrowing costs could make it more challenging for businesses to secure funds or repay existing debts. Mdutyana suggests that this could further impact employment prospects, stating, "The increase in repo rates will lead to an increase in the lending rates that are given out by commercial banks to businesses.
What does that do? It makes businesses less able to borrow from commercial banks and less able to expand investment, and less able to hire workers."
As a consequence, Mdutyana believes that the employment rate will struggle to improve, potentially keeping the unemployment rate persistently above 40%.
Written by urgent.news from SABC News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
