FNB expects a rate increase today of 25 basis points taking the Repo Rate to 6.75% and the prime lending rate to 10.25%! But the call will be a close one as many others believe the rate will remain unchanged.
This is the last rate decision of 2018 and if the rate remains unchanged it will do so until the end of January 2019.
Unfortunately, whatever the move the property market will remain subdued.
Key factors for FNB’s position:
- While inflation sits at around 4.9% the SARB has expressed interest in keeping inflation slightly lower at 4.5%. To do this they may increase the repo rate.
- On top of this there is upward pressure on inflation due to recent Rand weakness and increases to the price of oil (both can cause the cost of living to increase).
- Related to this is the belief that US Federal Reserve is likely to increase its rates soon and if the South Africa’s Reserve Bank lags behind this could worsen the Rand’s position.
The question is will the SARB wait and see what inflation looks like and react in January or will it be proactive and act now.
See the full FNB report below
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