Guiding consumers since 2009

Will we see another interest rate cut this week?

By Danielle van Wyk

Ahead of Thursday’s announcement of the repo rate by the South African Reserve Bank’s (SARB) monetary policy committee, some economists believe consumers could be in for another interest rate cut.

“I think a cut of 25 basis points or just perhaps 50 basis points can be expected,”stated Econometrix economist, Mike Schüssler.

In July, the Reserve Bank proved most experts wrong by cutting rates. SARB ultimately uses the repo rate to keep inflation in check. And with the inflation rate now within the target bounds of between 3% and 6%, experts believe it to make a strong case for yet another cut.

Andre Botha, dealer at TreasuryOneagreed: “We are leaning toward another rate cut on Thursday. One of the factors is that the inflation figure is well within the inflation targeting band of the Reserve Bank plus we have anaemic growth and the Reserve Bank will want to introduce measures to start the growth engine again. Lower interest rates would be one of the measures and now could be an opportune time to do it with the economic events coming up.”

When asked what this could mean for the consumer, Schüssler added: “It will help people with paying their debt off and will ultimately help economic growth. As a result, I think growth is likely to be 0,1% stronger this year and 0,25% stronger next year and 0,2% stronger in 2019. South Africa has the potential to grow above 2, 2% in 2019 if not close to 2, 5%.”

TreasuryOne’s Botha also weighed in: “While it will bring a little bit of relief as debt will be little cheaper and this could boost spending which would be a good economically, it would also dissuade savers which is not good for an economy.”

Although the alleviation of rate pressure beckons good news for the country, the economy and the consumers’ pockets, Schüssler believes more can be done.

“Yes, the rate cuts will help. But they are not the only thing we need. We need politically sensible policy; stability at the top of government and a big fight back against corruption and we need to see the government start to get closer to supporting business and not shouting them down. Interest rates are a short term solution and we need the structure and fiscal policy to get into the act too. Politicians and unions should get better relationships going with the business sector,” Schüssler explained.

He further believes that this trend will continue and that consumers could benefit from another rate cut in November. “It is likely that we should see South African rates down by 75 basis points in total this year.”

Botha however cautioned against pre-empting November’s decision. “The rate at which the Reserve Bank will start to cut the rate will be dependent on a lot of factors, and calling for a November rate hike might be a bit premature as we still have the Mid-term budget speech before that, that could send the Rand higher and have a negative effect on inflation. Furthermore the effect on the drought also needs to be factored in with higher food prices the cause of inflation. The rebound in the oil price also will have an effect on the decision in November.”

SARB will officially make its announcement on Thursday, 21 September.

Handy tip: If you are worried about how interest rates could affect your debt commitments, why not consider debt counselling. Click here to apply. 

Recent Articles

Featured Personal loan or business loan? The best way to finance your business

When starting your own business, you may have to rely on external funding. Perhaps you qualify for a personal loan, but would it be better to take out a business loan instead? We got in touch with a specialist to find out whether it’s best to take out a business loan or a personal loan to assist you with your ongoing business or start-up.

What to do when you’ve been denied a home loan

After months of scanning property sites and attending showhouse after showhouse, you’ve finally found what you’ve been looking for. But your dream of owning a home comes crumbling down when you receive the news that you’ve been denied a home loan. So, what now?

Best travel cards offered by top South African banks

Planning a trip abroad involves a lot of administration. You need to consider travelling arrangements, reasonable accommodation, and a daily itinerary. But have you considered how you’re going to pay your bills once you arrive? Besides considering bank costs, you also need to consider exchange rates.

Best ways to save your money short-term

For many, it seems close to impossible to save when spending on holiday getaways, Christmas gifts, while also trying to ensure there’s money left to survive January. Justmoney takes a look at the best ways you can save during the short term.

Deals

Takealot January Big Sale

Price: Available on request
When: Until 31 January 2020
Where: Online

Annique Restore Package Special

Price: From R600
When: Until 31 January 2020
Where: Centurion

Ster-Kinekor Senior Citizens Discount

Price: Available on request
When: Daily
Where: Nationwide