Following the South African Reserve Bank’s (SARB) decision earlier today to lower its benchmark Repo Rate by 0.25%, FNB will reduce its interest rates on prime-linked accounts with effect from Friday, 20 September.
FNB CEO Harry Kellan says, “We welcome the SARB’s rate cut as it consistent with the global trend towards lower interest rates. However, we do not anticipate a major cutting cycle. Inflation expectations remain above the Reserve Bank’s target mid-range of 4.5%, with average inflation expectation for 2024 at around 5%, though it is expected to decline next year.”
“Our view is that interest rates will be further lowered in 2025, but rate cuts will be modest and depend on new inflation data. Contributing factors include a 10% strengthening of the Rand, 2-year low fuel prices, and stabilised electricity supply,” adds Kellan.
“This has improved business and consumer confidence, and we expect higher economic growth. With widespread rate cuts by central banks globally, the Rand may strengthen, reducing the impact of imported inflation, especially on fuel prices. As of last week, 119 out of 124 central bank rate decisions in 2024 were to cut rates.”
FNB Chief Economist Mamello Matikinca-Ngwenya says, “The 25bps rate cut was expected, aligning with the consensus expectation for a cutting cycle to start this month. The cut follows the United States (US) Fed’s first interest rate reduction of 50bps, joining other central banks in advanced markets, allowing emerging markets such as SA to reduce rates without compromising competitiveness for capital flows. The August inflation data indicated weak demand pressures, making it an opportune time to lower interest rates for consumers and small business relief. However, the SARB’s outlook on future inflation dynamics could affect the extent of the further rate cuts.
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