Interest rate hike unlikely, experts say

THE SA Reserve Bank is expected to keep interest rates unchanged when its Monetary Policy Committee concludes its three-day meeting on Thursday.

All economists interviewed by Sowetan at the weekend predicted that the MPC would not raise the cost of credit this week.

Standard Bank chief economist Goolam Ballim said: “After having increased interest rates by a cumulative two percentage points since early 2014, the probability of the SARB’s MPC raising rates further has rapidly diminished.

“Indeed, while inflation is likely to linger above the Bank’s 3-6% target for several quarters, that economic growth has slumped to a standstill will likely stay the Bank’s hand.”

FNB household and property sector strategist John Loos said consumer inflation was looking good and the rand was gaining ground against major currencies.

He said he did not think interest rates would be increased.

Loos, however, said the bank expected one more interest hike of 25 basis points this year.

“Over some time we have seen a slowdown in the residential property sector and an interest rate hike will have slight negative consequences for credit demand.” National Federated Chamber of Commerce and Industry chief economist Landiwe Mahlangu said business was the most affected by the raising of interest rates due to the fact that it decreases demand while increasing the cost of credit.

“Some of the factors the MPC should consider include the declining mining output, IMF’s [International Monetary Fund’s] suggestion that the economy will stagnate this year and the inflation outlook, which has been affected by administered prices like fuel and electricity hikes.”