The Federal Reserve in America yesterday (Wednesday) kept interest rates at current levels, but warned of uncertainty in the US economy. Meanwhile South Africa is on tenterhooks awaiting today's announcement by the South African Reserve Bank.
After a gruelling escalation of interest rate hikes bringing them to 11.75% last year following the lows of 7% during Covid, and then a slow decline of them since September, battered South Africans are hoping for a cut, with one estate agency boss, Samuel Seeff of the Seeff Property Group, even asking for a 0.5% cut.
The current prime lending rate is 11.0%, based on a repo rate of 7.5% as determined by the South African Reserve Bank. The prime lending rate is the most important factor in how home loans work, says ooba home loans.
Neil Gopal, CEO of the South African Property Association(SAPOA), however said the SARB is likely to follow what the US Federal Reserve does.
“However, given that South African February inflation numbers came in at 3.2%, unchanged from January, one would expect a .25 basis point decrease in rates. A drop would certainly help stimulate the markets.”
Adrian Goslett, CEO of RE/MAX SA and chairman of the Real Estate Business Owners of South Africa (REBOSA), said while global economic factors, as well as statements and movements across the Atlantic Ocean, have certainly sent a few shockwaves across the globe, the data shows that inflation remains well below the median and very much inside the target range of the Reserve Bank.
“Homeowners and buyers, however, remain under financial pressure as the local economy still tries to get out of first gear. So, any assistance which would relieve household debt burdens would be well worth it,” Goslett said.
On Thursday morning, Reezwana Sumad, Nedbank CIB research analyst, said the rand started the day trading at R18.13.
"Events out from Turkey did see the currency markets experience some turbulence, as the price action was skittish in early trading. The rand for the day traded between R18.12 and R18.28, closing the session towards the bottom end of the range at R18.16,"
She added that the Federal Open Market Committee (FOMC) in US, as expected, delivered no change in interest rates.
"The Federal Reserve (Fed) maintained its stance, as it still expects a 50-bp cut over the rest of the year.
"This morning, the USDZAR opens at R18.12.
"The international markets saw a similar metric as the local unit. The EUR opened at 1,0940 and drifted down to 1,0881 into the close. The JPY was a benefactor of the USD volatility; it opened yesterday at 149,26 and opens at 148,42 this morning. Gold opens firmer this morning, currently trading at USD3 047/oz. On the data front, we have the German PPI and US jobless claims.
"We have the Bank of England meeting, European Central Bank Lagarde talking around lunch time and the SARB meeting this afternoon. Possible trading range for the rand today is R18.00-R18.25."
Earlier this month Standard Bank warned that the SA Reserve Bank may cut interest rates this month, but that South Africans should not expect any further cuts this year.