Financial experts have largely welcomed the Reserve Bank’s decision on Thursday to keep the repo rate unchanged at 7%‚ with most viewing it as a badly-needed breather for South African consumers and property owners.
Briefing reporters following the Monetary Policy Committee [MPC] meeting‚ Reserve Bank Governor Lesetja Kganyago said the decision to keep the repo rate unchanged had been unanimous.
It is the second time this year the repo rate has stayed the same‚ and the latest decision was widely expected by the market.
John Loos‚ household and property sector strategist at FNB said it was an appropriate decision from an inflation point of view.
“From a Consumer point of view‚ too‚ we are of the opinion that there was little need to hike interest rates. We are also of the opinion that the SARB’s current monetary stance is appropriate from a housing market stability point of view‚ and that a rate hike was not necessary at this stage.
Reserve Bank keeps interest rates unchanged
“The average prevailing lending rates‚ marginally above Prime Rate of 10.5%‚ are significantly higher than single-digit average house price growth in most parts of South Africa‚ keeping the market largely away from over-exuberance and large scale speculation‚” Loos said.
Nedbank’s Economic Unit warned‚ however‚ that a further increase this year remained a strong possibility.
It said the MPC had clearly indicated that although recent inflation developments have been positive‚ it remained on alert due to heightened global risks and the potential for further rand appreciation.
“Inflation could remain elevated for a longer period if agricultural output does not improve going into 2017‚ and ongoing wage negotiations in the manufacturing and mining sectors will also be closely watched‚ with any settlements well above the inflation rate likely to persuade the MPC to tighten further‚” the unit said.
“Expectations of a US interest rate hike at the December meeting have also risen in recent weeks‚ and if this coincides with a negative assessment of domestic prospects by rating agencies later this year the rand’s gains could be easily reversed.
“We therefore believe that it is too early to call the end of the hiking cycle as chances of a further 25 basis point hike later this year remain significant.”
Andrew Golding‚ CE of the Pam Golding Property group said the decision was welcome news for cash-strapped homeowners with mortgages‚ who also faced rising consumer costs across the board.
“Against the backdrop of a sharp spike in global political and economic uncertainty‚ including fallout from Brexit‚ comparably‚ South Africa’s outlook is encouraging. Just this week Bloomberg reported an inflow of investment of a record R85.7 billion in the country’s stocks and government bonds in June – a trend which has continued in July.”
Seeff chairman Samuel Seef said that while the latest inflation data showed a slight upward trend (up from 6.1% in May to 6.25%)‚ there was no compelling case for a further rate hike right now.
“An upward rate adjustment would have added to the already negative economic sentiment and would most certainly have served as a dampener on the economy and property market. Consumers are already burdened with rising prices and we are not seeing any overspending‚ so there was no real reason for a rate hike.”
Stability and a positive outlook was what was now needed for the economy and country‚ Seef said.
Unchanged repo rate a welcome breather for cash-strapped consumers: Experts
Financial experts have largely welcomed the Reserve Bank’s decision on Thursday to keep the repo rate unchanged at 7%‚ with most viewing it as a badly-needed breather for South African consumers and property owners.
Briefing reporters following the Monetary Policy Committee [MPC] meeting‚ Reserve Bank Governor Lesetja Kganyago said the decision to keep the repo rate unchanged had been unanimous.
It is the second time this year the repo rate has stayed the same‚ and the latest decision was widely expected by the market.
John Loos‚ household and property sector strategist at FNB said it was an appropriate decision from an inflation point of view.
“From a Consumer point of view‚ too‚ we are of the opinion that there was little need to hike interest rates. We are also of the opinion that the SARB’s current monetary stance is appropriate from a housing market stability point of view‚ and that a rate hike was not necessary at this stage.
Reserve Bank keeps interest rates unchanged
“The average prevailing lending rates‚ marginally above Prime Rate of 10.5%‚ are significantly higher than single-digit average house price growth in most parts of South Africa‚ keeping the market largely away from over-exuberance and large scale speculation‚” Loos said.
Nedbank’s Economic Unit warned‚ however‚ that a further increase this year remained a strong possibility.
It said the MPC had clearly indicated that although recent inflation developments have been positive‚ it remained on alert due to heightened global risks and the potential for further rand appreciation.
“Inflation could remain elevated for a longer period if agricultural output does not improve going into 2017‚ and ongoing wage negotiations in the manufacturing and mining sectors will also be closely watched‚ with any settlements well above the inflation rate likely to persuade the MPC to tighten further‚” the unit said.
“Expectations of a US interest rate hike at the December meeting have also risen in recent weeks‚ and if this coincides with a negative assessment of domestic prospects by rating agencies later this year the rand’s gains could be easily reversed.
“We therefore believe that it is too early to call the end of the hiking cycle as chances of a further 25 basis point hike later this year remain significant.”
Andrew Golding‚ CE of the Pam Golding Property group said the decision was welcome news for cash-strapped homeowners with mortgages‚ who also faced rising consumer costs across the board.
“Against the backdrop of a sharp spike in global political and economic uncertainty‚ including fallout from Brexit‚ comparably‚ South Africa’s outlook is encouraging. Just this week Bloomberg reported an inflow of investment of a record R85.7 billion in the country’s stocks and government bonds in June – a trend which has continued in July.”
Seeff chairman Samuel Seef said that while the latest inflation data showed a slight upward trend (up from 6.1% in May to 6.25%)‚ there was no compelling case for a further rate hike right now.
“An upward rate adjustment would have added to the already negative economic sentiment and would most certainly have served as a dampener on the economy and property market. Consumers are already burdened with rising prices and we are not seeing any overspending‚ so there was no real reason for a rate hike.”
Stability and a positive outlook was what was now needed for the economy and country‚ Seef said.
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