A second pause in interest rate increases could have a positive impact on business and consumer confidence and boost economic growth.
Inflation has fallen back into the Reserve Bank’s target band of between 3% and 6% after ten consecutive interest rate hikes and the monetary policy committee’s decision to leave interest rates unchanged for the second time in a row.
“High interest rates together with load shedding, more expensive power, food and fuel put great pressure on companies and individuals,” says Thys van Zyl, CEO of Everest Wealth. “This second pause in the interest rate increases will give consumers a much-needed break – especially for those with debt.”
The high interest rates also cause household spending to be strangled and a further respite in November, or even a reduction, could help consumer spending and improve households’ ability to service their debts in time for the December festive season.
“Consumers have had a hard time in the past year and a half and are struggling to keep their heads above water. A reduction in the interest rate can help them breathe a sigh of relief and escape from the debt spiral in which millions of South Africans find themselves.”
The high interest rate means that consumers have to reach even deeper into their pockets with credit card and store debt becoming more expensive and personal loans and car and home payments rising.
Consumers who incurred the debt when the interest rate was much lower are now struggling to service their debt or simply cannot afford it anymore. The average salary in the country is also not increasing at the same rate and South Africans are getting poorer and poorer.
Any further rate hikes would be catastrophic for consumers. “The interest rate must now be kept stable and then systematically adjusted downwards. Consumers are in trouble and it’s time to protect them before the last straw breaks the camel’s back.”
Any further interest rate increases will simply aim to protect the value of the rand and this is not the solution as political and economic instability bears the blame with consumers ultimately paying the price.