{"id":14620,"date":"2026-01-22T09:30:20","date_gmt":"2026-01-22T09:30:20","guid":{"rendered":"https:\/\/microvibenews.com\/?p=14620"},"modified":"2026-01-22T09:30:20","modified_gmt":"2026-01-22T09:30:20","slug":"reserve-bank-should-bite-the-bullet-on-rates","status":"publish","type":"post","link":"https:\/\/microvibenews.com\/?p=14620","title":{"rendered":"Reserve Bank should \u2018bite the bullet\u2019 on rates"},"content":{"rendered":"<p><\/p>\n<div>\n<p><iframe loading=\"lazy\" src=\"https:\/\/iframe.iono.fm\/e\/1637541?layout=modern\" width=\"100%\" height=\"170\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>You can also listen to this podcast on iono.fm here.<\/p>\n<p><strong>SIMON BROWN:<\/strong> I\u2019m chatting with Chris Harmse of Sequoia Capital. Chris, appreciate the time. December inflation 3.6%, a little up from November and a fair distance from the new 3% target, although that has some wiggle room. Were there some funnies in it, or is this a number to worry about?<\/p>\n<p><strong>CHRIS HARMSE: <\/strong>No, I don\u2019t think so. I think it is temporary, although it is an upside risk. If you look at the data, the main reason was of course, the sharp increase in meat prices \u2013 12 6%. So that\u2019s still an upside risk. It may have a more profound effect in months to come, and the Reserve Bank may feel that it is going to hover between 3.5% and 4%, and not between 3% and 3.5%.<\/p>\n<p>But if you look at the annual rate, Simon, the annual rate is 3.2%, and our economists always say don\u2019t look at one month\u2019s figure, look at all 12 months. That\u2019s 3.3%, and that\u2019s close, very close.<\/p>\n<p><strong>SIMON BROWN: <\/strong>I take your point. We\u2019ve got an MPC [Monetary Policy Committee] meeting next week. Are they going to kick off the year with a quarter percent rate cut? What\u2019s your expectation?<\/p>\n<p><strong>CHRIS HARMSE: <\/strong>I believe so. I believe there are two reasons they should do so, and I hope they have the same interpretation. If you look at the rand\/dollar, we did a 95% correlation between the rand\/dollar and the precious metal and our 95% confidence level tells us that the rand is on its way to R14.68\/dollar at the end of the year. We\u2019re already at R16.25\/dollar, and we see it at \u00a0about R15.65\/dollar when they have their next meeting.<\/p>\n<p>Given that, and also given our expectations for the oil price \u2013 rather under $60\/barrel than above $60\/barrel \u2013 at least at current levels, you must just remember such a strong rand is going to have a huge effect on the other import prices of food, and also the fact that we don\u2019t see load shedding; we don\u2019t see Eskom using a lot more diesel at this stage. I still believe that the inflation rate is more or less going towards 3.3%, 3.2%.<\/p>\n<p>So I think the Reserve Bank has to bite the bullet now and bring that down. But of course, you must remember the other thing that the Reserve Bank is \u2026 maybe for a normal man on the street it\u2019s more important to \u2026\u2026at the difference between the repo rate, the bank overdraft rate and the prime rate.<\/p>\n<p><strong>SIMON BROWN: <\/strong>Yes. That has now suddenly been opened for discussion. I have to say, I was not aware that that 3.5% sort of difference was actually a Reserve Bank mandate. I just thought the banks had picked that number randomly.<\/p>\n<p>If that changes \u2013 do you think there\u2019s a chance to change? \u2013 does it have a significant impact on consumer debt?<\/p>\n<p><strong>CHRIS HARMSE: <\/strong>Definitely, definitely. Simon, if the repo rate is at 8%, then you get an eight-plus of\u00a0 3.5%, which will give you \u2026 Okay. But if the repo rate comes down to 5%, then a 3.5 percentage point each way is that much more. So the banks are making far more profit. And the reserve Bank helps them in this way to keep it at 3.5%. And I don\u2019t think that is fair. On a 5-6% repo rate, because we got a lower inflation target, they bring that thing down to something like 2%, 2.5%, which will have an enormous [effect].<\/p>\n<p><strong>SIMON BROWN: <\/strong>Absolutely. Because otherwise, to the point, our inflation is coming down, our repo rate comes down. But that 3.5% doesn\u2019t bring the prime sort of into light.<\/p>\n<p>A quick last point. We\u2019ve got an FOMC [Federal Open Market Committee] meeting next week as well. We\u2019ve just had President Trump referring to \u2018Jerome Two-Late Powell\u2019. There\u2019s obviously a lot of antagonism there. The sense is that the FOMC is probably not going to cut next week. Is that your view?<\/p>\n<p><strong>CHRIS HARMSE: <\/strong>Yes, unfortunately, it\u2019s my view that they\u2019re not going to cut. The risk is too uncertain at this stage. It is too uncertain. My mind tells me that they should cut. But I think they\u2019re not going to do it.<\/p>\n<p><strong>SIMON BROWN: <\/strong>Yes. They\u2019re going to keep that eye on the data. That\u2019s the data and most particularly the weakening of jobs. But of course inflation\u2019s been ticking higher.<\/p>\n<p>We\u2019ll leave it there. Chris Harmse of Sequoia Capital, I always appreciate the insights.<\/p>\n<p>Listen to the full MoneywebNOW podcast every weekday morning\u00a0here.<\/p>\n<\/p><\/div>\n<p><script data-cfasync=\"false\">\n            !function(f,b,e,v,n,t,s)\n            {if(f.fbq)return;n=f.fbq=function(){n.callMethod?\n                n.callMethod.apply(n,arguments):n.queue.push(arguments)};\n                if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';\n                n.queue=[];t=b.createElement(e);t.async=!0;\n                t.src=v;s=b.getElementsByTagName(e)[0];\n                s.parentNode.insertBefore(t,s)}(window, document,'script',\n                'https:\/\/connect.facebook.net\/en_US\/fbevents.js');\n            fbq('init', '779812924991616');\n            fbq('track', 'PageView');\n        <\/script>#Reserve #Bank #bite #bullet #rates<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You can also listen to this po&hellip; <\/p>\n","protected":false},"author":1,"featured_media":14621,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[200,1643,6107,905,4536],"_links":{"self":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/14620"}],"collection":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14620"}],"version-history":[{"count":0,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/14620\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/media\/14621"}],"wp:attachment":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}