Guiding consumers since 2009

The repo rate to rise again

By Staff Writer

 

From Business Report
October 9 2007
By Ethel Hazelhurst

Johannesburg - The money market is still betting on a repo rate hike on Thursday, when the Reserve Bank monetary policy committee (MPC) concludes its meeting.

Lisa MacLeod, a fixed income portfolio manager at Investec Asset Management, said yesterday the market was pricing in a 70 percent chance that the official repo rate would rise another 50 basis points.

It is currently at 10 percent, after a total rise of 3 percentage points since June last year.

However, there is a case to be made for a pause in the series of hikes. And expectations among economists are shifting: MacLeod said only six of 18 economists polled by Bloomberg were predicting a 50 basis point rise.

Chris Hart, an economist at Investment Solutions, said: "The slowdown in consumer demand is no longer an early indication but has become a mature trend. Monetary policy cannot do more than restrain consumption."

He said the focus previously was on high levels of spending and borrowing. "But vehicle sales, for instance, have been trending down for two years and now are actually falling. Retail sales have been trending down since last year and in July rose only 4.9 percent in real terms. Now the levels are more acceptable and the trends are more obvious."

Ridle Markus, a senior economist at Absa, expected the MPC to pause. "Inflationary pressures are already priced in and inflation is likely to be above the upper limit of the target band until at least the first quarter of 2008," he said.

He added that the inflationary pressures were coming from outside the country, so a further rate hike would have little or no effect on inflation in the near term. And, he said, there was strong evidence consumer spending was slowing, "with year-on-year car sales growth negative for the eight consecutive month in September".

Markus's final point was that household debt levels were high.

"Some consumers are already feeling the strain," he said. "Hiking rates further risks the possibility that the combined impact of a 350-basis-point hike since mid-2006 could be more severe on certain consumer segments than intended. Moreover, data on the impact of the National Credit Act has so far been limited and the impact has therefore been relatively uncertain."

He said the MPC would have to take into account the high oil prices. "Despite the appreciation in the rand, the rand per barrel oil price has increased from less than R400 per barrel in January to its current R537 - up 38 percent in the year to date, peaking at R557 a barrel in early September," he said.

Recent Articles

Featured Are you entitled to your spouse’s pension after divorce?

Divorce means more than just parting ways with your partner. It may also involve parting ways with your assets. The Divorce Act states that your retirement fund forms part of your assets. This means that it will be considered when dividing up your assets.

Retrenched – what payments are you entitled to?

In the current struggling economic climate, retrenchments are a regular occurrence and not everyone survives the cut. If you find yourself on the receiving end of retrenchment you may have questions about the payments that are due to you.

Do you want to settle your debt?

You may be considering settling your credit account, whether it’s a credit card or various store accounts, now may be as good a time as any. This especially if you have saved, or you received a tax return or salary bonus. 

Can you afford a personal loan?

Taking out new debt is not always a choice. However, if you’re not pressed by a medical emergency or an unforeseen disaster, it’s worthwhile considering whether you can actually afford it. But what does it mean to “be able to afford a personal loan”? What percentage of your income should you not exceed dedicating to it? 

Deals

Eat for less on Tuesdays at Panarotti’s

Price: R59.99
When: Tuesdays
Where: Nationwide

Get discounts with Clicks ClubCard Seniors Programme

Price: Available on request
When: Daily
Where: Nationwide

Amani Spa Voucher Special

Price: R1000
When: Daily
Where: Cape Town, Jhb, and Port Elizabeth