Unchanged interest rate a huge missed opportunity for the economy
SARB keeps rates unchanged at 7%, a missed chance to boost growth. Experts urge bold cuts to aid the economy, jobs, and the property market.
The decision by the Reserve Bank to retain the repo rate unchanged at 7.00% (prime rate at 10.50%) is a huge missed opportunity for the economy and property market, says Samuel Seeff, chairperson of the Seeff Property Group.
This is particularly disappointing given that the US Fed announced a rate cut of 25-bps yesterday. Seeff says just based on the currently favourable economic fundamentals, there was ample room for the Bank to provide another rate cut. Inflation has moderated to 3.3%, comfortably near the Bank’s lower target range, and the Rand has remained stable at around the R17.50/USD range despite the unresolved US trade challenges.
There was adequate reason to provide at least a 25-basis point cut, and we believe further rate cuts are needed to take the rate back to the pre-pandemic level. Seeff says while recent rate cuts have brought relief, the effect on the broader economy has been negligible, evident in the low economic growth rate of just 0.8%. He notes that despite inflation being lower than it was before the pandemic, the interest rate remains higher. This must be addressed to stimulate growth and create much-needed jobs.
Commenting on the property market, he says market activity has improved with many Seeff branches reporting improved sales, and depleting stock levels. Buyers are clearly taking advantage of the interest rate savings, but Seeff says overall transaction volumes are still somewhat below the pre-pandemic levels in many areas.
Market conditions in most areas remain favourable for buyers with the interest rate lower compared to mid-2024. Depleting stock levels now also provide impetus for more sellers to come into the market, especially since prices are up.
FNB, for example, reported that national house price growth continues on the path to recovery, as it had strengthened to 4.5% by August. This is more than double the 1.2% growth at the start of the year, and now outpaces inflation.
Seeff says, however, that economic growth and job creation must be a priority right now. The property sector therefore continues to call on the Reserve Bank to take more bold action, especially when the opportunity presents for a rate cut.
Issued by Gina Meintjes
