Ahead of the strong possibility of a credit ratings downgrade on Friday, the Reserve Bank’s Monetary Policy Committee adopted a ‘wait and see’ approach and kept the repo rate steady.
The repo rate remains unchanged at 6.75%, while the prime lending rate will remain at 10.25%. The central bank’s September interest rate decision followed a 0.25 percentage point reduction in July, which was the first time it had cut rates in five years.
“With consumer inflation seemingly under control, but with this month’s (November) fuel hike and Eskom seeking a dramatic escalation in tariffs, coupled with political uncertainty ahead of the ANC elective conference in December and the likelihood of the US Federal Reserve raising interest rates before the year-end, the MPC was expected to take a hawkish view,” said housing agents Pam Golding.
“Although at this stage it appears that an interest rate reduction is most likely not on the cards for the foreseeable future, we remain of the view that a further, meaningful cut would go a long way towards alleviating economic pressure on consumers, bolstering investor and business confidence, and act as a stimulus for the residential property market.”
Ratings agencies Moody’s and S&P Global are expected to release their rating decisions for South Africa on Friday evening.
Currently, both Moody’s and S&P have South Africa on a negative outlook, with the former keeping the country’s local and foreign currency debt one notch above junk, and the latter keeping local currency debt above junk, and foreign currency debt in junk.