Another increase of 75bps in the repo rate announced by the Monetary Policy Committee on Thursday September 2002, is disappointing for aspiring home owners requiring credit and existing home owners with mortgages, said numerous estate agencies on Thursday. Existing and aspirant homeowners already have to contend with the economic effects of severe load shedding, high fuel and rising food costs, and increasing electricity and other municipal tariffs.
Dr Andrew Golding, chief executive of the Pam Golding Property group, said he had to remain optimistic.
“Although this is the sixth consecutive hike in the repo rate, taking it to 6.25%, as the Reserve Bank attempts to bolster the weakening rand and dampen inflation expectations, this still remains below pre-Covid repo rate levels of 6.5%, while the prime interest rate now stands at 9.75%,” he said.
Dr Golding said consumers in general were feeling the strain on household income, with the food and energy price shocks earlier this year creating an inflationary ripple effect across the economy. This was even if the Reserve Bank highlighted the fact that the challenges facing the local economy were not the current level of interest rates and the cost of borrowing, but rather the ongoing infrastructure bottlenecks such as electricity and transport, as well as education.
“The Reserve Bank’s deputy governor, Dr Rashad Cassim, recently suggested that the bank is attempting to move towards a more ‘neutral’ interest rate setting and would be attempting to avoid dampening economic activity as much as possible,” said Dr Golding.
“The MPC’s decision today was ultimately guided by the inflation outlook and its assessment of the risks of wage inflation emerging, coupled with global trends of significant interest rate hikes,” he said.
While higher local interest rates will help to protect the rand currency, when combined with rising price pressures they will temper domestic spending at a time when the economy is already struggling to grow, particularly given the recent return of Stage 6 load shedding.
Inflation eased to 7.6% last month from a 13-year high of 7.8% in July, raising hopes that inflation has peaked. The Reserve Bank’s role is to contain inflation, by bringing inflation and inflation expectations back to the 4.5% inflation target mid-point, within the target range of 3-6%, as a precondition for sustainable economic growth.