SARB wary as risks remain: FNB

PUBLISHED: Thu, 23 Nov 2017 15:53:13 GMT

Mamello Matikinca |FNB Chief Economist

Following the South African Reserve Bank’s decision earlier today to leave interest rates unchanged, FNB confirms that it will maintain its prime lending rate at 10,25% and will review its position after the next SARB Monetary Policy Committee (MPC) meeting in January 2018.

Says FNB CEO Jacques Celliers: “While no change was a widely anticipated outcome of this meeting of the MPC, factors that drive price instability have been gathering momentum of late. Certainly, a further ratings downgrade could place upward pressure on interest rates in coming months. Under these conditions, consumers should manage their seasonal spending with a view to 2018. Consumers should also use the last few weeks of the year to review their finances and consider reducing unnecessary debt with bonus payments.”

“As FNB, we are increasingly using our expertise and big data capabilities to help customers with their short-term and long-term financial goals. This includes expanding our Wealth and Investment offering to help our Retail, Wealth and Business clients with their investment needs,” adds Mr Celliers.

Mamello Matikinca, FNB Chief Economist says, “The SARB’s decision to keep rates on hold comes as little surprise given the persistent upside risks to the inflation outlook. While we expect inflation to continue to moderate – we expect inflation to ease towards the mid-point of the Reserve Bank’s target band by early next year – significant rand weakness could negate this downward trend. Moody’s and S&P are expected to deliver their credit assessments tomorrow (the 24th of November). This follows a disappointing Medium Term Budget Policy Statement which pointed to ongoing fiscal slippage and rising debt. In the absence of a credible plan to rein in government indebtedness, it’s difficult to see how South Africa can avoid a downgrade.”

“The other potential upside risks to the inflation outlook include the gradual ongoing tightening in global liquidity conditions; the threat of increased political turmoil and policy uncertainty in the run-up to, and after, the ANC’s elective conference, the potential for significant electricity price increases and a persistent increase in the oil price. These factors lead us to believe that we are unlikely to see further interest rate cuts; in fact we are likely to see gradual policy normalisation in the second half of 2018,”concludes Matikinca.

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