Markets have been treading cautiously with US President-Elect Donald Trump policies with foreign countries weighing heavy, which could eventually impact the MPC’s decision on rates for South Africa. Picture: Bongani Shilubane/ Independent Newspapers.
Consumers will hope for some much-needed reprieve from their monthly budgets at the end of this month when the South African Reserve Bank Governor, Lesetja Kganyago, announces the Monetary Policy Committee’s (MPC) decision on interest rates for the country.
The governor is expected to announce if there will be any change to interest rates in the country on 30 January.
The start of the year saw consumers finances impacted by fuel price increases for the first month of the year, which came into effect on 1 January.
The fuel price increases saw a litre of petrol costing between 12 and 13 cents more.
The increases in fuel for January is listed below:
Neil Roets, CEO of Debt Rescue said this is very bad news for consumers who already carry the financial burden of 2024 into the new year.
He said there is no doubt that a growing number of credit-active consumers are relying on their credit cards to cope with the rising cost of living and income that is not keeping up with this.
Roets said, “The announcement of a second consecutive petrol price increase has dampened the New Year cheer for millions of South African motorists and commuters, who will need to dig even deeper to fill their tanks and cover transport costs in the months ahead.”
“South Africans are buckling under the financial weight of relentless price hikes in essential services such as electricity and water, while food prices remain at distressing levels, placing nourishing meals beyond the reach of millions of households. Consumers will be turning to credit to make ends meet in January, further entrenching the annual ‘Januworry’ trend of entering the year with more debt,” he further said.
Economists are not holding out much hope of inflationary relief in the short term, with Investec Chief Economist Annabel Bishop predicting that South Africa’s inflation rate is likely to average above 4.0% year on year, with the MPC noting a number of risks to the 2025 outlook, including the geopolitical environment.
Markets have been treading cautiously with US President-Elect Donald Trump policies with foreign countries weighing heavy, which could eventually impact the MPC’s decision on rates for South Africa.
Anchor Capital co-chief investment officer, Nolan Wapenaar, told Business Report this past week, “A cut in January is, in our view, a coin flip. With the US Federal Reserve becoming more hawkish over December, we think that the Sarb will hold rates steady in January rather than waiting for the next meeting for the first cut of 2025.”
“We don’t think that the Sarb will watch President Trump as much as they are likely to keep an eye on developments at the US Federal Reserve.”
Wapenaar added that the likely higher path of US inflation, higher global yields, and slower rate cutting abroad will spill over into the Sarb’s thinking.
“Still, our data will be supportive of further cuts in the first half of 2025, and we expect a few small cuts as a result.”
South Africa’s central bank keeps a close eye on the Federal Reserve in the US and this past week minutes of the Fed's December policy meeting showed officials were concerned that President-elect Donald Trump's proposed tariffs and immigration policies may prolong the fight against inflation.
However, the US currency was boosted this past week by recent signs of resilience in the US economy and inflation, which could spell good news for interest rates locally.
BUSINESS REPORT