Interest rates expected to hold steady this month as inflation pressures linger

REPO RATE

- ASHLEY LECHMAN

FOLLOWING a series of interest rate cuts earlier this year, economists and market watchers largely expect the South African Reserve Bank (Sarb) to hold the repo rate steady at 7% when the Monetary Policy Committee (MPC) meets on 18 September.

While there is still room for further cuts later in the year, much will depend on how inflation trends and the actions of the US Federal Reserve in the days leading up to the meeting.

Adrian Goslett, Regional Director and CEO of REMAX Southern Africa, said that the Reserve Bank's September call will hinge on a delicate balance of factors.

"If inflation edged nearer to the SA Reserve Bank's preference of 3%, this would keep hopes for a cut alive. A reacceleration, on the other hand, would firmly entrench a September hold.

"Similarly, if global markets cut their rates and if the rand holds steady, this would make later SARB cuts easier, but does not necessarily force one in September," he said.

For debt holders, Goslett noted that the most prudent expectation is for rates to remain unchanged.

"If inflation and the rand behave, the next 25 basis point cut is more likely at a subsequent meeting such as in November rather than next month."

Turning to the property market, Goslett pointed out that affordability remains constrained despite the recent reductions in the prime lending rate.