IEJ warns higher policy rates may lead to higher unemployment
Policy think tank, the Institute for Economic Justice (IEJ), says the increase in the policy rate by the Reserve Bank will have a significant impact on the employment rate in the country.
The central bank’s Monetary Policy Committee has decided to hike the policy rate by 25 basis points to 7.25%.
This means the prime lending rate increases to 10.75%.
Liso Mdutyana, a junior researcher at the IEJ, has warned that the increase in the policy rate will lead to higher borrowing costs for businesses, making it more challenging for them to secure funding or pay off existing debt.
Mdutyana says this can further impact employment.
“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. So another effect then is that the employment rate is not able to pick up, so the persistently high unemployment rate above 40% will remain the same.”