Jacques Celliers | CEO | First National Bank| mail me |
Mamello Matikinca-Ngwenya | Chief Economist | First National Bank | mail me |
Following the South African Reserve Bank’s decision earlier today 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 MPC meeting in May 2019.
Conditions have changed significantly for consumers in the first quarter of 2019. After a promising start to the year, higher fuel costs and loadshedding are likely to have a negative impact on household finances.
On the upside, the United States recently changed its outlook for 2019 from a hiking cycle to no movement, and this may provide the SARB with room for flexibility.
Lower rates will result in reduced borrower’s cost; however, consumers must continue managing their finances prudently.
While the general economic outlook remains lackluster, we believe that our business is better positioned to continue making a difference in improving the financial wellbeing of our customers. More importantly, we are firmly committed to enabling small businesses to continue playing an active role in economic growth and job creation.
The SARB’s decision to keep rates on hold was in line with our expectations. The decision indicates that the SARB remains somewhat comfortable with the inflation trajectory, but would need to see inflation expectations moderating further if they were to ease the policy rate.
While we expect inflation to remain below 5% for 2019, we caution that risks to inflation outlook, particularly emanating from the rand exchange rate remain.
Moody’s will deliver its rating assessment on Friday, 29 March, and a sovereign downgrade could lead to a rise in borrowing costs.
Absent of any adverse shocks, we are of the view that anemic economic growth, which may be worsened by continued load-shedding, combined with very weak domestic demand will likely result in rates remaining flat for the rest of the year.
