Rate cut expected to bring relief to consumers, says FNB

Rate cut expected to bring relief to consumers, says FNB
JOHANNESBURG - Following the South African Reserve Bank’s (SARB) decision today to reduce its repo rate by 0.25%, FNB confirms that it will reduce its prime lending rate from 10.25% to 10% with effect from Friday, 19 July. The lower rate applies to all prime-linked loans.

Jacques Celliers, CEO of FNB, says “Today’s rate cut is expected to bring some relief to consumers who have been under pressure during the last few months. Following a contraction in GDP during the first quarter, we look forward to improved conditions later in the year based on expectations of a good rebound and this, coupled with lower interest rates, may aid the anticipated recovery.”

“However, the SARB is correct in its stance that interest rates alone are not a primary driver of the economy, consumers will have to continue managing their expenses prudently. I urge consumers to take every opportunity to reduce expenses as lower interest rates create an opportunity to build a buffer into their budgets when they consider long-term loans for a house or a new car,” says Mr Celliers.

“Sensible borrowing is a valuable financial tool to enable important moments in a consumer’s life such as housing, education and unexpected emergencies. Loans should be used in a way that balances the cost of long-term gains with day-to-day living expenses,” he added.

Mamello Matikinca-Ngwenya, FNB Chief Economist, says “The SARB’s decision to cut the repo rate by 25 basis points was in line with our expectations. Weak domestic demand and the inability of corporates to pass on costs to consumers should keep inflation contained. On the growth front we do not forecast a meaningful improvement in growth in the year ahead; we expect growth to lift to 1.2% in 2020 from 0.5% in 2019, as such muted inflationary pressures along with very weak growth point to a more accommodative monetary policy stance. Furthermore, the global tilt towards more accommodative monetary policy, with the Fed expected to ease rates, has also provided room for easing monetary policy in South Africa. While we believe there is scope for another rate cut, the bank will, however, need to assess fiscal risks before attempting to ease policy further.