Following the South African Reserve Bank’s (SARB) decision to keep interest rates unchanged, FNB confirms that it will maintain its prime lending rate at 10.25% and will review its position following the next SARB Monetary Policy Committee (MPC) meeting in March 2019.
FNB CEO Jacques Celliers says: “After substantial back-to-back fuel price cuts together with stable interest rates and projections of better economic conditions in the year ahead, consumers are able to start 2019 on a positive note. In the year ahead, we will be looking for upturns in business and consumer confidence for evidence that these critical drivers of the economy are turning the corner.”
“The Reserve Bank has indicated that it will follow a path of modest rate hikes over the next two years and for consumers, this means building a small savings buffer into their budgets when they consider a longer-term loan for a house or a new car. We urge consumers to avoid taking on unnecessary debt to cover the cost of day-to-day purchases,” adds Mr Celliers.
FNB Chief Economist, Mamello Matikinca-Ngwenya says: “The SARB’s decision to keep the policy rate on hold was in line with our expectations. The interest rate hike in November has certainly allowed the SARB time to assess the policy path. While headline inflation is expected to lift this year on the back of higher food prices and a weaker currency, a further moderation in the oil price poses downside risk to our inflation expectations. Our estimates for core inflation for the rest of the year remain relatively conservative, indicating that underlying inflationary pressures remain muted.”
“In line with the Central Bank we view the Rand exchange rate and higher utility rates as the biggest risks to the inflation outlook. Nonetheless, the SARB’s preference for inflation expectations to be anchored at the mid-point of the inflation target, along with tightening global financial conditions, leads us to believe that there is room for a rate hike later this year. In the absence of adverse risks to the inflation outlook, we expect the hiking cycle to be shallow with the SARB hiking rates by 25 basis points this year,” concludes Matikinca-Ngwenya.