South Africans avoid any further tightening of their purse strings this afternoon following the announcement by the Monetary Policy Committee (MPC) of 2018 that interest rates would remain unchanged. The prime lending rate thus stays at 10% and the repo rate at 6.5%.
“While most financial analysts predict that we will end the year at a repo rate of 6.75%, the MPC wisely has chosen to keep interest rates unchanged for a few months longer which will allow consumers time to lower their debts before interest rates make their predicted climb. We applaud the MPC for not putting any further strain on the population’s income during a time of economic decline that has seen the country enter into a technical recession,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
The MPC still warns that inflation rate is too close to the top end of the SARB’s 3.0%–6.0% target range for 2018. The weak Rand, low investor confidence and continued fuel price hikes are putting inflation levels under pressure. Unless we experience a turn around that sees inflation rates lower over the course of the next few months, and considering that the decision was not unanimous with three MPC members in support of a hike and only four in favour of the decision for this meeting, it is likely that the MPC will raise interest rates at the coming meeting in November this year.
During these difficult financial times, Goslett suggests that consumers do their best to avoid getting further into debt than they already are and to pay off their pre-existing debts as aggressively as possible now while interest rates remain stable. “As difficult as it may be, consumers should practice financial discipline now more so than ever before. I would advise that homeowners make room in their budgets over the next few months in case interest rates climb, which would increase the instalments on their home loans just before the December holidays. However, if interest rates remain unchanged for the rest of the year, they will still be rewarded for their frugal living by having some money set aside for the Christmas season,” Goslett concludes.