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PRESSURE TO HIKE INTEREST RATES REMAINS, SAYS FNB

  Following the South African Reserve Bank’s (SARB’s) decision to increase its repo rate by 0.75%, FNB will raise its prime lending rate by 0.75%.

FNB CEO Jacques Celliers says, “We must commend the SARB for its careful management of South Africa’s monetary policy despite the headwinds in markets this year. Prudent monetary policy measures to protect our currency’s value while managing inflation remain essential to shielding South Africa against turbulent times. As international trends indicate an uncertain outlook, it is even more critical for our country to stay the course in its monetary policy decisions.

“Locally, the vulnerability of the electricity supply continues to be a barrier for both consumers and businesses that have not invested in alternative energy sources. Through our lending activity and collaboration with suppliers, we are determined to help our customers on their journey towards diversifying energy sources. In keeping with our advice-led approach, we also want to help customers better manage their exposure to debt while maximising the benefits of higher interest rates. With only a month until the end of the year, we are optimistic that 2023 will bring many opportunities for our business, customers, and country to flourish,” adds Celliers.

FNB Chief Economist Mamello Matikinca-Ngwenya says, “The Monetary Policy Committee (MPC) has raised rates by 75bps to 7.0%. While local fundamentals should limit upward pressure to the repo rate, global dynamics are also at play. Global financial conditions have continued to tighten, with the ECB, Bank of England, and the Fed recently hiking policy rates by 75bps each. Furthermore, the Fed has another meeting in December and is expected to hike by a further 50bps. This, along with lower investor risk appetite as the global economic slowdown unfolds, has weighted on the rand-dollar exchange rate and exerted upward pressure on local interest rates. Locally, expectations are for a shallow rebound in GDP growth, following the contraction in the second quarter”.

“GDP growth continues to be constrained by network industry constraints, including energy and logistics, and mounting consumer headwinds should weigh on demand. Inflation is currently above the SARB’s preferred anchor of 4.5% but is projected to fall towards this anchor within the next year, indicating that the upward pressure to repo is dissipating. Nevertheless, the weaker exchange rate compounds the upside risks to inflation. Overall, the MPC’s focus on containing inflation expectations has been key in ensuring that headline inflation remains anchored once the current bout of supply-driven inflation eases,” concludes Matikinca-Ngwenya.

INFO SUPPLIED.

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