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MPC hikes repo rate amid 'tightening cycle'

2016-03-17 16:00

South African Reserve Bank governor Lesetja Kganyago has announcement a 25 basis point increase to a level of 7% per annum.

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Last Updated at 18:53
17 Mar 15:55
Kganyago: Regarding a question by a member of the media regarding the current issues between Treasury and Sars, he said that would be best answered by the Treasury and the Hawks. With that he ended the briefing.

17 Mar 15:55
Kganyago: Independence of Sarb is enshrined in SA's Constitution. We have never felt that independence to be under threat. And if ever that is under threat, be assured the good men and women of Sarb will defend it.

17 Mar 15:53
Kganyago: You will not see the kinds of hikes you saw in the past. We try to see things through the cycle and data becomes very important and that changes all the time.

17 Mar 15:53
MPC member Rashad Cassim: We are in a tightening cycle. The important question is, though, at what speed does this cycle move.

17 Mar 15:49
Kganyago: There was no split decision among the MPC about the 25bps hike this time.

17 Mar 15:49
Kganyago: When an MPC member's term comes to an end, the President will apply his mind and decide whether you should continue another term or if he should appoint someone else. That applies to my appointment too. That is the process we have in the bank.

17 Mar 15:47
Kganyago: About job offers: Head hunters also call us - I presume you include those too? No-one of MPC came to me to say they have had any "interesting job offers" - they are very committed to the MPC.

17 Mar 15:45
Kganyago: As long as prices are rising, the purchasing power of your income is declining. Those in upper income brackets can find ways to protect against inflation and as such when one sees inflation rising, the first thought should be what is the impact on the poor for they cannot protect themselves against inflation.

17 Mar 15:44
Kganyago: The poor spend the bulk of their income on food.

17 Mar 15:43
Kganyago: Our problem is dealing with inflation outside our target range.

17 Mar 15:43
Daniel Mminele (MPC): Ratings level that Moody's assigns to SA is two levels above sub-investment grade - important to remember this.

17 Mar 15:40
Daniel Mminele (MPC): Some investors are not too perturbed by what ratings agencies say as they do their own research, while others have mandates which bind them to what investors want them to adhere to.

17 Mar 15:40

Re/Max: Consumers will be required to tighten their belts once again, although many may not have any notches left to tighten, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. He notes that economists from banks around the country have warned that the rate is likely to increase by at least 2% during the course of the next two years.

Considering the rising cost of utilities and food this will negatively impact the property market and affect consumer confidence.“The Reserve Bank is still firmly on course for a cycle of rate hikes and consumers will need to ensure that they are prepared for that. Those who currently own property should pay as much extra money into their bonds as possible to lighten the load and shorten the terms of the loan. This will require homeowners to cut down on unnecessary spending and pay off short-term debt,” advises Goslett.

He adds that homeowners and potential buyers will need to make provision for the fact that the interest rates will be increasing. “Those who wish to get into the market will need to ensure that they have a sufficient buffer to be able to afford the expected rate hikes. Purchasing a home that they can only just afford will have them running into financial distress further down the road. Ideally potential buyers should also put down as large a deposit as possible, as this will give them more leverage when negotiating with banks on their lending rate,” Goslett concludes.


17 Mar 15:36

Andrew Golding of Pam Golding Properties: The Monetary Policy Committee’s decision to further increase the repo rate was unfortunate off the back of the January (2016) hike and given the pressing need to help stimulate growth in South Africa’s economy, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

“We had hoped that the repo rate would remain stable following the good news that the rand had strengthened since the last MPC meeting and South Africa’s fiscal policy has tightened, taking some pressure off monetary policy. Coupled with this, on the global front the Federal Reserve Bank is not hiking rates as aggressively as initially anticipated and the European Central Bank continues to ease monetary policy.

“Despite the fact that the country’s ongoing challenging economic pressures and fundamentals are not driving growth in the housing market, increasingly we are seeing that regional and area-specific demand is more dependent on a range of conditions and factors which include convenient location, lifestyle, infrastructure and long term investment potential.

“Although we are currently in an upward repo rate cycle, interest rates are still not near the highs experienced in 2008 and are not expected to increase significantly during the year. So although housing activity in South Africa has slowed along with house price growth, the demand for homes remains strong and the market retains its resilience.

This is further demonstrated by the market confidence shown by astute and experienced developers, who continue to bring new stock to market in high demand areas where uptake is brisk."


17 Mar 15:34
Kganyago: Only laughs when asked by a journalist if he or any of his MPC members have ever been offered government jobs by non-government entities.

17 Mar 15:33

Samuel Seeff of Seeff Properties: Today’s interest rate hike is exactly as expected. It is the third successive hike and, as we all know by now, interest rates are set to continue climbing this year as we are amidst one of the toughest economic cycles in the country’s history.

That is the reaction from Samuel Seeff, chairman of the Seeff property group following the announcement by the Reserve Bank’s Monetary Policy Committee (MPC) to hike the repo rate by 25 basis points, taking it to 7% and the base home loan rate to 10.5%.

A tough economy with poor growth and rising costs and interest rates is the general theme for this year, says Seeff. The economic landscape is further dominated by a potential downgrade of the country’s sovereign credit rating to junk status, something that will have a profound impact on the economy and property market.

The rising rates and costs are impacting housing affordability, especially for the bulk of buyers who require mortgage bonds. That consumers and home buyers will find the going tough this year is unavoidable, but Seeff says that we should not get too drawn by the negativity.

The economic challenges and headwinds notwithstanding, we are still seeing a resilient market. It is slowing, that it inevitable, but says Seeff, there is no disaster in sight and no need for buyers and sellers to panic.


17 Mar 15:32
Ian Wason, CEO of DebtBusters: “This repo rate increase will blow everyone’s budgets – South Africans cannot absorb any more increases in their debt repayments.” This announcement does not bode well for South African consumers, as the Sarb’s decision to increase interest rates means that they will be paying even more toward their debt. “The timing of this rate hike is extremely bad for most South Africans."  

17 Mar 15:31
Kganyago: The issue of business confidence is very important.

17 Mar 15:30
Kganyago: No we have not met Moody's. Yes we will meet Moody's. We will know what we will ask them when we meet them.

17 Mar 15:29
Kganyago: MPC does not deliberate on political elements.

17 Mar 15:28

Jacques Du Toit, Absa senior economist: The Sarb’s Monetary Policy Committee (MPC) announced a further hike of 25 basis points in the repo rate to a level of 7% per annum. Commercial banks are to raise their prime lending and variable mortgage interest base rates for extending credit to the public and the business sector by the same magnitude to 10.5% per annum.

Interest rates have been hiked by a cumulative 200 basis points since early 2014 and are back at levels last seen in early 2010. The latest interest rate hike came against the background of continued upward pressure on inflation as a result of trends in and the outlook for major inflation drivers, such as the exchange rate, food prices, electricity tariffs, and oil and fuel prices.

Further hikes in lending rates are forecast for the rest of 2016, which will cause debt repayments to increase, contributing to additional financial strain on consumers. Banks are to continue to monitor economic and consumer-related trends regarding their risk appetite and lending criteria.


17 Mar 15:27
Kganyago: MPC does not deliberate on political elements.

17 Mar 15:27
Kganyago now taking questions from the media.

17 Mar 15:24
Monetary Policy Committee (MPC) announced a further hike of 25 basis points in the repo rate to a level of 7% per annum.

17 Mar 15:22
Kganyago: MPC view risks to be on upside, especially for 2017. MPC notes demand pressures on inflation being subdued with household expenditure being subdued.

17 Mar 15:22
Kganyago: Food prices have been accelerating faster than previously expected.

17 Mar 15:22
Kganyago: MPC assesses risks to be on the upside.

17 Mar 15:20
Kganyago: Domestic petrol price has been reduced to lowest since March 2015. But this decline could be substantially reversed in April.

17 Mar 15:19
Kganyago: Annual CPI food price now expected to peak at 11.6% in Q4 2016.

17 Mar 15:18
Kganyago: Food price pressures driven by the drought and exchange rate, remain upside risk to inflation.

17 Mar 15:17
Kganyago: Recent Budget 2016 provides for a fiscal consolidation path.

17 Mar 15:17
Kganyago: Credit extension to households by banks remain subdued.

17 Mar 15:16
Kganyago: New vehicle sales declined, but increase in export of new vehicles at the same time.

17 Mar 15:16
Kganyago: Improving unemployment rate expected to remain a challenge.

17 Mar 15:15
Kganyago: Capital expenditure in private sector turned positive in the 4th quarter, but was concentrated in the renewable energy sector.

17 Mar 15:15
Kganyago: Continuing drought also points to unfavourable outlook for the agricultural sector.

17 Mar 15:14
Kganyago: Outlook for 1st quarter for mining and manufacturing is constrained.

17 Mar 15:14
Kganyago: Potential output growth remains unchanged.

17 Mar 15:14
Kganyago: Domestic economic growth outlook has deteriorated further.

17 Mar 15:13
Kganyago: Lack of capital flows remains a concern.

17 Mar 15:13
Kganyago: Domestic political developments and risk of a downgrade have influenced the rand too.

17 Mar 15:11
Kganyago: Rand remains highly volatile and vulnerable to domestic and international factors.

17 Mar 15:10
Kganyago: Outlook for China remains one of intense speculation. Inflation is below target in many advanced economies. US Fed is expected to remain on its normalisation path but at a more subdued rate.

17 Mar 15:09
Kganyago: Outlook for many emerging market economies remains weak. Outlook for China remains one of intense speculation.

17 Mar 15:08
Kganyago: Subdued growth is expected in the Japanese economy.

17 Mar 15:08
Kganyago: Weakening in consumer spending in US.

17 Mar 15:08
Kganyago: International economic outlook remains challenging with marked decline in global growth.

17 Mar 15:06
Kganyago: Core inflation is expected to breach upper band of target range in 2nd quarter of 2016 and last for 4 quarters, averaging 6.2% in 2016.

17 Mar 15:05
Kganyago: Higher food price forecast.

17 Mar 15:04
Kganyago: Inflation is expected to peak in 4th quarter of 2016 and to return to within the target band in 4th quarter of 2017.

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