2015 Mar 26 - Interest Rates to Remain Fixed - Good For Buyers                                               Port Elizabeth Property First Article

"The MPC has unanimously decided to keep the repurchase rate unchanged for now," Reserve Bank Governor Lesetja Kganyago said on Thursday, 26 March 2015.

The repo rate has remained unchanged since a 25 basis points rate hike in July 2014.

According to the Bank's latest forecasts, inflation is now expected to average 4.8% in 2015, compared with the previous forecast of 3.8%. It is expected to average 5.5% in the final quarter of the year, compared with the previous forecast of 5.3%.

“This could mean that we once again hit the 6 plus numbers in the first quester of 2016,” said Colin Fibiger, CEO of Property Network. “Government has lost control over many other issues affecting our CPI and we can expect them to up the interest rate to counter the inflationary growth.”
“While this is a concern,” said Fibiger, “the market remains in favour of buyers and they should make use of the ongoing opportunities offered to them.”
“The shackles on growth are slowly being removed and buyers should enter the market before pricing shifts considerably upwards,” he said, “and interest rates remain favourable and stable.”

Fibiger added that the outlook for the economy remains overshadowed by the electricity supply constraint, lack of long term management of fuel prices, and government corruption and mismanagement, all which appears to have had an adverse effect on recent economic activity.

"This constraint is likely to persist for some time, and has resulted in a downward revision of short-term potential output to between 2 and 2.5%. Nevertheless, some improvement on the 2014 growth rate of 1.5% is expected in 2015, in the absence of protracted work stoppages," he explained.

The rand exchange rate continues to be the main upside risk to the inflation outlook, and remains highly vulnerable to the timing and pace of US monetary policy normalisation.

Additionally, wage and salary increases in excess of inflation and productivity growth also pose an upside risk to inflation.

Fibiger concluded saying that the timing of future interest rate increases will be dependent, as before, on a range of domestic and external factors.

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