Mixed reactions to unchanged interest rates
Property and bank experts have weighed in on the Monetary Policy Committee’s (MPC) decision to leave interest rates unchanged.
On Thursday, the MPC announced that, in a unanimous decision, its repo rate would remain unchanged at 3.5%.
The MPC cited that the overall risks to the inflation outlook appeared to be balanced in the near and medium-term.
Seeff Property Group chairperson Samuel Seeff said the Reserve Bank missed the mark with its decision.
“The country and economy desperately need a stimulus and, while probably expected, it is disappointing that the bank has not taken the opportunity to provide some impetus,” he said.
He said there was an opportunity for a rate cut during the past two MPC meetings.
“This was evident from the split decisions, especially in January when inflation fell to a 16-year low. Inflation has declined further in February, to 2.9%, well below the bank’s target, providing ample motivation for a rate cut.”
RE/MAX of Southern Africa chief executive and regional director Adrian Goslett said the decision was a predictable outcome and, unless things took an unexpected turn, interest rates would probably remain steady for the remainder of the year.
He said homeowners and first-time buyers continued to find themselves in a favourable position when it came to the interest rate on their home loan.
“While a further cut would have helped the many South Africans who are struggling to make ends meet within the current economy, keeping rates at this historic low will at the very least make it easier for homeowners to keep up with the repayments on their home loan within this challenging economic climate,” said Goslett.
He said that while it was unlikely that interest rates would climb this year, homeowners should leave room in their budget for a possible increase of around 0.5 points during the course of the year.
He said the MPC had warned of two potential increases of 25 basis points in the second and fourth quarters.
“This is all dependent on how the economy performs, and many economists predict that an increase is not likely to be necessary. However unlikely it may or may not be, homeowners should just bear this in mind when budgeting for the year ahead,” he said.
FNB chief economist Mamello Matikinca-Ngwenya agreed that the decision to keep policy rates unchanged was expected.
“The decision should be read as the SARB’s (South African Reserve Bank’s) attempt to strike a healthy balance between rising inflation risks and the relatively fragile growth outlook,” she said.
“In recent months, we have seen growing signs of tightening global financial conditions and rising concerns over the medium- to the long-term inflation outlook. Domestically, inflation is expected to trend higher in the coming months, albeit still anchored within the target band, amid rising food, fuel and electricity prices.”
The head of Investment Strategy at Absa Global Investment Solutions, Ricardo Smith, said there was no real inflation pressure for the MPC to rush hiking rates.
“There are some signs of the inflation picking up that includes the economic recovery, global oil prices, although they were negatively year on year due, largely to base effects from last year.
Smith said the month-to-month bases showed that global oil prices were recovering.
“The price of Brent crude oil currently is about $60 per barrel and, of course, with the volatile South African rand which does pose a threat for inflation outlook as well as administered prices including electricity and fuel.”
BUSINESS REPORT ONLINE