Absa rules out interest rate hike in 2006

Absa, South Africa’s largest commercial bank, is ruling out an interest rate hike over the next year, provided there are “no exogenous shocks given the economy.”

The bank’s view is expressed in its December 30 comment on November’s broad measure for money supply (M3), which rose marginally from a revised 15,9% year-on-year to 16,4%. Market consensus, as surveyed by Bloomberg, was 17,5%.

However, growth in credit extended to the domestic private sector (PSCE) in November fell further to 18,8% compared with October’s 19,3%. The market expected growth of 18,2% in November.

Annual growth in private sector credit extension has now fallen for the fourth consecutive month after peaking at 24,2% y/y in July. While part of the drop-off in demand for credit was probably related to the lower purchasing power as a result of the high fuel prices during the third quarter, the current high household debt level also appears to have an
impact on credit demand.

Absa, in its comments on the figures, believes the South African Reserve Bank (SARB) will welcome the slowing momentum in private credit extension data. Although, it warns that December’s readings could show some upward movement again, but this it expects, to be seasonal only.

“We rule out an interest rate hike over the next year, provided there is no exogenous shock. We further expect that although there could be room for an interest rate reduction
during 2006, the SARB will remain cautious given high debt levels and the widening current account deficit.”
Loading comments
More news articles
Guidelines to securing a home loan
29 May 2018
Many young South Africans are working hard to achieve their dream of purchasing their first home. However, the process can be challenging due to the daunting application process, which can take up to 2 years and is often enough to discourage prospective buyers.
read more
Things you should consider before upgrading to a new home
23 Apr 2018
The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
read more