Following the South African Reserve Bank’s decision earlier today to leave its repo rate unchanged, FNB confirms it will maintain its prime-linked accounts at existing interest levels and will review this position after the next SARB MPC meeting in September.
FNB CEO Harry Kellan says, “While we are seeing increased movements by other central banks towards lower rates, the South African Reserve Bank has taken a measured decision to sustain its inflation vigilance. Interest rates alone, however, are not the sole drivers of the economy. We have already seen a clear improvement in business conditions and employment opportunities across many sectors of the economy with encouraging signs of a recovery in overall GDP.”
“We have seen marked reductions in fuel prices, increased stability in the Rand exchange rate and improved consumer confidence, albeit from a low base. Business confidence slipped in the first quarter ahead of national elections and we expect this will improve in coming surveys. The sustained delivery of electricity has played an important role in this recovery,” adds Kellan.
The bank notes that the residential housing market is reflecting increased activity and this trend is gathering momentum with a general perception that the rate hiking cycle has ended. First-time buyers who may have been waiting for an ideal time to buy a property could find that prices will increase in coming months.
FNB cautions that the recovery is taking place against a backdrop of tough business conditions where excess capacity such as vacant retail and factory space must be re-utilised. The consistent discipline of basic money management remains important in this recovery cycle. Therefore, consumers that are considering long-term loans for a new home or business should look at the prospect of lower interest rates as an opportunity to pay down loans earlier and reduce overall interest costs, rather than stretching their budgets to make larger commitments.
FNB Chief Economist Mamello Matikinca-Ngwenya says “The Monetary Policy Committee’s (MPC) decision to leave interest rates unchanged was in line with the consensus expectation. Nevertheless, the pending interest rate cutting cycle is starting to come into view. A less depreciated rand and relatively stable oil prices have further supported the MPC’s previous prediction that inflation would stabilise in the first half of next year. Furthermore, the European Central Bank delivered a 25bps cut in June and softer economic data in the United States has allowed the Fed to shift to a less hawkish stance, with the first cut expected in September. These shifts have supported an improvement in global risk sentiment and created space for monetary policy easing in riskier markets. As a result, some predictions are for the first SARB cut to be delivered at the next meeting.
Ultimately, the MPC should remain cautious. While political uncertainty has subsided and the energy constraint has alleviated, unified policy implementation remains key to driving productivity growth. In addition, surveyed inflation expectations remain above the SARB’s 4.5% target, and the global high-for-long interest rates theme prevails. Therefore, we can anticipate a shallow cutting cycle and that accessing savings will not be as affordable as it was in the years leading up to the pandemic.”
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Consumer Information
FNB offers assistance in the form of a Debt Remedy facility from FNB Home Loans, and a Special Repayment Arrangement offered by FNB Card. FNB’s Investment Product House conducts weekly rates review meetings at which rates earned on non-prime linked investments are reviewed independently of the SARB’s MPC announcements. Revised rates are communicated via rates boards in branches and on FNB’s web site, www.fnb.co.za.
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