MPC PLAYS IT SAFE
The predicted (though not favoured) decision was made earlier today by the Monetary Policy Committee (MPC) as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would continue at 10% and the repo rate at 6.5%. The decision to keep interest rates unchanged at a time when a drop could have provided consumers with some much-needed relief was a cautious move by the MPC, who believes that inflation rate is still too close to the top end of the SARB’s 3.0%–6.0% target range for 2018.
“Leading up to the announcement, it was predicted that interest rates would remain unchanged. However, many remained hopeful for a cut as, in comparison to the same period last year, inflation levels are lower this year to date. A cut at this time would have done well to stimulate our economy and help consumers who are struggling with the increasing fuel costs and general raised cost of living,” explains Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
“The decision to keep interest rates at their current rate is not altogether surprising, though. The global economy is rather volatile at the moment and the Rand continues to be weak. Investor confidence has waned after the initial hike following Ramaphosa’s inauguration and fuel price hikes continue to put inflation levels under pressure,” Goslett adds.
During these difficult financial times, Goslett suggests that consumers pay off as much of their short-term debts as possible while interest rates remain stable, especially now that the MPC has announced that interest rates are likely to be raised by 25 basis points in subsequent meetings this year. “As long as interest rates remain unchanged, consumers have the opportunity to continue paying off their debts at their original rates. Now is also the ideal time to enter the market and purchase property before interest rates on your home loan increases,” Goslett concludes.