The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has voted to keep interest rates unchanged, and the prime interest rate therefore remains at 11.75%. This is the first time since November 2021 that the MPC has not raised interest rates.
The decision to keep rates unchanged comes as a surprise to many, as SARB Governor Lesetja Kganyago had hinted in June that the bank would maintain a tight monetary policy for longer in a bid to bring inflation back to within its target range of 3%-6%. However, the MPC has clearly decided that the recent slowdown in inflation, coupled with the marginal growth in the South African economy, warrants a pause in the rate hiking cycle.
The slowdown in inflation is largely due to the continued decline in the oil price. In May, annual consumer inflation slowed from 6.8% in April to 6.3%. This is its lowest level in 13 months and a step closer to the Reserve Bank’s target range.
The marginal growth in the South African economy is also encouraging. In the first quarter of this year, the economy grew by 0.4%. While this may be slight, it is certainly another step in the right direction.
The decision to keep interest rates unchanged is good news for South African consumers who have faced 10 rate hikes in a row since November 2021. The higher interest rates have put a squeeze on household budgets and made it more expensive to borrow money. The pause in the rate hiking cycle will provide some relief to consumers and businesses.
It is important to note that the SARB has not ruled out further rate hikes in the future. If inflation continues to rise, the MPC may decide to raise rates again.
Overall, the decision to keep interest rates unchanged is a positive one for the South African economy. It will provide some relief to consumers and businesses and allow the economy to continue to grow. It is important to remain vigilant and monitor inflation closely. If inflation starts to rise again, the SARB may need to raise rates to keep it under control.
What does this mean for homeowners and borrowers?
The decision to keep interest rates unchanged is good news for homeowners and borrowers. It means that their monthly repayments will not increase, which will help to ease the financial burden on many households.
Remember that interest rates are still at a relatively high level. This means that borrowing money is still expensive, so it is important to shop around for the best possible deal.
If you are considering buying a home, it is important to factor in the cost of interest rates. You should also be aware that interest rates could rise in the future, so you need to be prepared for this possibility.
For reliable guidance on purchasing or selling your property, get in touch with Home and Hectare’s Property Specialists. You can reach them at 041 581 1744 or by emailing email@example.com to receive trusted advice.