The question on everybody’s minds is whether or not the South African Reserve Bank will be announcing a hike in interest rates on Today. According to Investec Specialist Bank’s Head of Cash Investments, René Grobler, there are three reasons why interest rates will in all likelihood not be increased this week.
Firstly, inflation expectations are looking better than estimated and inflation could end closer to the target range of three to six percent by year-end than originally anticipated, she says.
The second reason is that economic growth expectations for the foreseeable future remain weak and higher interest rates would slow growth further.
Thirdly, households are under pressure with high levels of indebtedness and a slowdown in real disposable income growth. Higher interest rates, explains Grobler, would place additional pressure on consumers.
“However, the Reserve Bank could be tempted to hike rates by another 0.25% this week as a result of the recent weakness of the rand,” she cautions. “But on balance, we will most likely see rates remain where they are for now, although the chances are good that we will see further hikes in 2015,” concludes Grobler.
René Grobler has been working in the wealth creation and investments industry for seven years and specialises in cash solutions for individuals and businesses.