Commercial Banks Starting to Hike Interest Rates

Business Day reports the following this morning:

Overdraft rate up 32 basis points

Commercial banks raised their weighted average overdraft rate to 8.95% in December, up 32 basis points from November. From October 2011 to November 2012, banks had cut the rate by 122 basis points, from 9.85% to 8.63%, even though the South African Reserve Bank cut its repo rate by only 50 basis points to 5.0% over the same period.
Banks are starting to hike interest rates despite the Reserve Bank’s 50bps rate cut in July 2012. This is the market starting to correct for the imbalances that the Reserve Bank’s interest rate distortions have caused. At 5%, the Reserve Bank’s interest rate is set too low and has caused major distortions in the economy’s capital structure. If the market continues to push interest rates higher, the economy will crash, which means the Reserve Bank may very well respond with more rate cuts to keep the phony money manipulated economic mini-boom propped up.