The Monetary Policy Committee is set to meet and deliver their decision around interest rate policy on 30th March 2023. While many hope that interest rates will remain stable, there is a greater possibility that interest rates will climb yet again at this meeting.
What are the factors at play?
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, is hopeful that interest rates might remain stable, but is also aware of the risks that could lead to yet another rate increase.
“Inflation decreased for the third consecutive month down to 6,9% in January. However, this is still above the MPC’s stated midpoint target range and the risks to inflation remain considerable. While I am hopeful that we might see interest rates stabilise soon, I would also caution consumers to leave room in their budgets for another 0.25 – 0.5% increase,” says Goslett.
In their previous statement, MPC Governor Lesetja Kganyago stated that economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook.”
Considering that the risks to the economic circumstances have not improved since the last meeting, it seems prudent to plan for another interest rate hike.
“Following every interest rate hike, there is naturally more rental enquiries and fewer queries from interested buyers. The higher interest rates get, the less active the housing market is likely to become,” says Goslett.
If interest rates do climb, Goslett reminds consumers that all debts will become more expensive.
“Prioritise paying off any bad debts first and try to avoid taking on any new debt in the coming months. Above all else, keep up with the repayments on your home loan. If things get too tight, act sooner rather than later. Rent out a spare room in your home to help you afford the repayments or downscale to something more affordable before things get too out of hand,” he recommends.
It is difficult to predict with any certainty what interest rates will do over the course of the year, but Goslett is hopeful that interest rates will stabilise soon – if not at this meeting, then possibly later in the year.
“It all depends on what happens in the global markets and how well we are able to manage the ongoing loadshedding crisis, as these are some of the most pressing concerns for inflation levels in South Africa. Once the MPC decides that these risks are under control, then it is likely that we will see interest rates stabilise again,” he states.
Writer : Kayla Ferguson