Ahead of the South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) announcement, interest rates are expected to remain unchanged, according to experts. Picture: Freepik
While the South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) will be making an announcement on Wednesday, March 27, about interest rates, experts expect that interest rates will remain unchanged.
FNB Economics said that they expect interest rates to remain unchanged.
Sanisha Packirisamy, economist at Momentum Investments also said that despite a slightly higher-than-expected jump in the inflation measure in February, it maintained its view that the Sarb will keep interest rates constant at 8.25% in March.
“The MPC will likely continue to flag upside risk to inflation and that should make the committee cautious on reducing interest rates too quickly,” FNB said.
“Developments in advanced markets are also key and a high for long theme includes later and shallower cutting cycles in the near term, and real interest rates generally remain above pre-pandemic levels over the medium term.“
According to FNB Economics, the interest rate hiking cycle started in November 2021, with a cumulative 350bps of increases by the end of 2022, from 3.5% in October 2021 to 7.0% in December 2022.
Packirisamy said that the repo rate was then hiked from 7% at the start of 2023 to 8.25% in May 2023. That was 25 basis points in January 2023, followed by 50 basis points in March 2023 and 50 basis points in May 2023.
Since then, the Sarb has kept interest rates unchanged at 8.25%, as the MPC monitors the impact of higher interest rates on local demand. The pause is also supported by pauses in advanced market central banks.
According to Packirisamy, these increases in interest rates had an effect on consumers who owned prime-linked debt, such as a mortgage or car loan.
“Debt-servicing costs rose in accordance to the rise in interest rates. With higher debt repayments, consumers had less money to spend on goods and services in the economy,” Packirisamy said.
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