Unchanged rates a relief - expert - As it happened

That's that for updates.

Bond originator ooba reacts:  The rates decision is a great relief to South African property owners who are facing increasing financial strains.  However, it is not expected that the decision to not hike rates will stimulate  demand for residential property as housing affordability for prospective homebuyers is already constrained.  

The recent series of rate increases, elevated levels of debt and the rising cost of living expenses coupled with sluggish economic growth has intensified affordability pressure on homebuyers.  The outlook therefore for the South African property market for the remainder of 2016 is that of subdued homebuying activity with lenders becoming more cautious about extending credit.

Neil Roets: Relief of unchanged interest rate is welcomed, but consumers will have to remain cautious in spending, as 2016 remains a very difficult year, this after the announcement of the higher unemployment figures, which now stands at 26.4%, and the 18% drop in mining output.

South African Reserve Bank (Sarb) governor Lesetja Kganyago has announced no change in the interest rate on Thursday.This means the repo rate, which is the interest rate at which the Sarb lends money to commercial banks, remains at 7%. The cost of borrowing stays at 10.5%.

SARB governor expressed concern about South Africa’s inflation and growth dynamics, says it continues to highlight the policy dilemma facing monetary policy.

Ian Wason:  While this news of a no change in interest rates comes as a relief to South Africans, the knock on of the previous three consecutive increases totalling 100 basis points since November 2015 appears to have already taken its toll.

Johan Gouws, Head of Absa Asset Consultants Barclays Wealth & Investment: The decision to leave interest rates unchanged speaks of a pragmatic approach by the Monetary Policy Committee in living up to their mandate of price stability while considering the broader context and challenges facing the local economy.

Jacques Du Toit, a senior economist at Absa: Further hikes in lending rates are forecast towards the end of the year to curb inflation, with debt repayments to rise and consumers to experience increased financial strain as a result. Credit-risk profiles, financial vulnerability and consumer confidence remain fragile, with credit providers’ risk appetites and lending criteria to continue to reflect trends and the outlook for the economy and consumer finances.

Keeping repo rate stable makes sound economic sense, says Dr Andrew Golding, CE of the Pam Golding Property group. The pause in the repo rate will provide aspirant and existing home owners with a further assurance of the sound medium to long term investment potential in property.

Neil Roets: Confirmation of interest rate remaining unchanged is a relief to severely over indebted consumers.

JUST IN: Repo rate remains unchanged at 7%.

The MPC felt there was some room to pause in rate hikes.

Rand weakens steadily, now trading at R15.89/$.

Ian Wason, chief executive of DebtBusters: We fear that these consumers are already being squeezed too much.

Neil Roets, CEO of Debt Rescue: Reserve Bank Governor Lesetja Kganyago has confirmed strain of drought and unemployment figures on economy.

Inflation expected to be in the target range of 3% and 6% in 2018. The rate remains sensitive to political developments, says Kganyago.

Kganyago says domestic petrol price has increased by R1 since March, further hike expected in June.

Sarb expects food price inflation to peak at 12% by end of this year.

Reserve Bank revises 2018 GDP growth to 1.7% from 1.8%.

Kganyago  - the forecast for household expenditure remains constrained.

Ian Wason: Should rates go up, consumers with vehicle finance, mortgages, clothing accounts and credit cards are going to feel it the most. Having already felt the pressures of huge inflationary increases in their expenses, another increase in their debt repayments could be the last straw.

Sarb revises average 2016 CPI to 6.7% from 6.6%.

Kganyago - Global growth concerns resurfaced in May, concerns of a downgrade and political tension affected the rand.

Ian Wason, chief executive of DebtBusters:: “While we recognise that it is imperative to curb inflation, an increase in the repo rate now will hurt the over-indebted consumer the most. We fear that these consumers are already being squeezed too much.”

Kganyago: The rand continues to weaken.

Kganyago: There is some uncertainty about when the next rate hike by the US Fed will take place.

Kganyago - Inflation expected to be in the target range of 3 and 6 percent in 2018.

The rand has traded in a range of R14.50-R15.90 since the MPC's last announcement.

The rand trading at R15.87/$.

Global growth still hesitant, says the governor.

Kganyago says global growth remains hesitant.

Kganyago: inflation expected to be in the target range in 2018.

Inflation is expected to peak in the last quarter in 2016, says Kganyago.

The latest inflation forecast is that there will be some improvement in the medium term. Inflation expected to average 6.7% in 2016, governor says.

The Sarb governor says core inflation is also rising.

Kganyago says economic growth is disappointing, and recovery is likely to be slow.

Kganyago starts off by saying food and petrol price pressure continue to intensify.

Kganyago takes to the podium. He's ready to go.

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Debt-strapped consumers will be keeping a close watch on the rates announcement.

Debt experts, although torn on which way the decision will go, are leaning strongly towards a call for no change.

"Any increase, however small, coupled with the increased cost of living would place severe strain on consumers who are clearly struggling to make ends meet," said Debt Rescue CEO Neil Roets.

Cape Town - All eyes are now turned to SA Reserve Bank (Sarb) governor Lesetja Kganyago, who is due to announce the monetary policy committee’s latest rates decision at 15:00.

Most economists expect the Sarb to hold rates now and raise again later in the year.

Hard-pressed South Africans have already seen a total interest rate hike increase of 100 basis points since November last year.  

However, the recent rise in the oil price and weaker currency may be the spanner in the works when the monetary policy committee (MPC) announces its interest rate decision.

Oil prices, which retreated further in afternoon trade on Thursday on fears that the US will raise interest rates as soon as June, were still at almost $20 above their 13-year lows of below $30 in February.

At about 14:00, US benchmark West Texas Intermediate (WTI) for June delivery was down 84 cents at $47.35 per barrel. Brent for July dipped $1.08 to $47.85 a barrel, according to AFP.

The rand was trading at R15.87/$ ahead of the announcement from a New York close of R15.86. The range for the day so far was 15.7458 - 15.9283 against the greenback.