Cash-strapped consumers will have a little reprieve for Black Friday and Christmas shopping as the bond and car instalments will remain the same over the festive season until at least the end of January.
However, prices of consumer goods on the shelves will not ease as inflation remains elevated and prices could surge even further due to the delays caused by congestion at the ports.
The South African Reserve Bank (SARB) yesterday decided to keep the repurchase rate unchanged for the third time in a row at an elevated 8.25% in a unanimous decision.
This will leave the prime lending rate at 11.75%, in a bid to anchor inflation expectations around the target midpoint.
October's headline inflation surged to 5.9%, nearing the upper limit of the 3% to 6% target range and moving away from the preferred 4.5% midpoint where it prefers to anchor inflation expectations.
SARB Governor Lesetja Kganyago said that at the current repurchase rate level, monetary policy was restrictive, consistent with the inflation outlook and elevated inflation expectations.
“Serious upside risks to the inflation outlook remain. In light of these risks, the committee remains vigilant and stands ready to act should risks begin to materialise,” Kganyago said.
“Guiding inflation back towards the midpoint of the target band reduces the economic costs of high inflation and will achieve lower interest rates in the future.”
The SARB has hiked interest rates 10 times by a total of 475 basis points since November 2021 before adopting a pause in May this year.
FNB CEO Jacques Celliers said the rate reprieve would lift holiday spirits after a tough year.
“While many factors indicated the possibility of a rate hike today, the Reserve Bank’s decision to hold their key lending rate provides some relief after a challenging year,” Cilliers said.
“However, the bank’s decision aligns with traditionally high spending during Black Friday and the holiday season.”
However, Harcourts South Africa CEO Richard Gray was not as optimistic about the rates decision.
“Although we welcome the decision to keep rates the same, this unfortunately offers no respite to consumers who are under immense financial pressure going into the festive season,” Gray said.
“With inflation being at the top end of the target range, we know that opportunities for offering relief to consumers were limited, but inflation is not being driven by overspending by the people who are suffering most from the high interest rates.”
The rising cost of borrowing has also been a strain on households’ purchasing power since the hiking cycle began as sustained high interest rates have increased the burden of servicing asset-linked debt.
The residential property market has proven to be reasonably resilient until now, but needs a downward move in the rate to regain some impetus.
The average interest rate for a bond has risen from 8.3% in the fourth quarter of 2020 to 12.4% in the third quarter of 2023.
RE/MAX regional director and CEO Adrian Goslett said the decision to keep them steady was a relief for the property market, as many homeowners are already starting to reach out for help to cope with the higher home loan repayments.
“According to our distressed property sales division, compared to the same period in 2022 to year-to-date November 2023, there has already been a 40% increase in the number of mandates received from the banks’ distressed property programmes,” Goslett said.
“What’s more, there has also been a 160% increase in the number of clients our agents have referred to their banks for assistance in signing up to their distressed programmes.”