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Reaction to latest repo rate hike

By unknown | Jun 13, 2008 | COMMENTS [ 0 ]

Dennis Dykes, economist at Nedbank, said: "The market had been expecting a 100 basis points increase. It's a surprise in that sense, but is it good or bad? It's certainly better than a 100 basis points and we believe that the medicine applied so far is doing the job."

Fanie Joubert, economist at Efficient Group, said: "It's a surprise move after hawkish statements the governor made and rumours of an emergency meeting between this one and the last one. Those factors created expectations for a whole percentage point rate hike."

Standard Bank economics division said: "The CPIX inflation measure is well above the upper limit of the inflation target and shows no sign of returning to the target range in the short-to-medium term.

"Clearly, inflationary pressures are far from receding and several indicators pointing to further consumer uncertainty about electricity tariffs makes inflation forecasts hazardous, but a target-friendly outlook could perhaps materialise only late next year.

"The MPC acknowledged the unsettled global and local economic and financial environment as a concern, but in line with its mandate, decided to increase the repo rate by 50 basis points.

"Banks are likely to follow suit and raise the prime lending rate to 15,5percent either tomorrow or early next week."

Jacques du Toit, senior property analyst at Absa Home Loans, said: "The affordability of housing, especially for first-time buyers in the low and middle-income categories, will be further adversely influenced by the latest rate hike.

"Consumers' spending power has been severely eroded by higher food and fuel prices over the past number of months. In addition to this, the cumulative rise of 500 basis points in interest rates since mid-2006 has caused the average monthly repayment on a mortgage loan to rise by 35,6percent."

Business was thankful that the repo rate increase was only 50 basis points and not 100 basis points, the South African Chamber of Commerce and Industry (SACCI) said yesterday.


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