Latest news with #SARB
IOL News
5 hours ago
- Business
- IOL News
Given where the economy is, interest rate hikes could do more harm than good
A tighter monetary policy amid the current global uncertainty could worsen South Africa's economic situation. Image: RON AI South African Reserve Bank (SARB) governor Lesetja Kganyago has strongly advocated for the country to lower its inflation target from 4.5% to 3%. Although interest rates are currently on a downward trajectory, albeit following a cautious approach, there are fears that a lower inflation target would lead to a tighter monetary stance, potentially bringing an end to the current cutting cycle and possibly even leading to more hikes in the short term if inflation edges upward amid the current global economic uncertainty caused by Donald Trump's trade war. Experts argue that a lower inflation target would improve price stability, reduce borrowing costs and enhance investor confidence in the long term. However, many feel it would entail some short term 'pain' for the sake of long-term gain. Yet tightening monetary policy could be a dangerous move in the current economic climate, warns Frederick Mitchell, chief economist at Aluma Capital. The US says it intends to impose a 30% tariff on South African goods, with threats of a further 10% tariff targeting BRICS countries. This could plunge many industries into crisis. Industries that rely on exports, such as vehicles, citrus and mineral commodities, are particularly vulnerable. These sectors are already under stress and additional tariffs could hinder economic growth and exacerbate the country's already high unemployment rate of over 30%. Within this context, the SARB faces a constrained path, Mitchell said. 'Conventional wisdom suggests that raising interest rates can curb inflation, yet in the current environment, where inflation remains subdued but economic growth is threatened, tightening monetary policy may exact an economic toll without addressing the underlying trade issues,' Mitchell explained. 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Next Stay Close ✕ As SARB Governor Lesetja Kganyago has noted, inflation is expected to remain within the target range, but global trade war uncertainties loom large. Higher tariffs and potential retaliatory measures could put a damper on South Africa's economic recovery. 'Increasing interest rates in such a fragile environment risks stifling growth further, especially as global economic slowdown cues stemming from China's potential slowdown and trade tensions compound the problem,' he added. 'Given that South Africa's economy is highly reliant on exports and sensitive to external shocks, the restrictive monetary stance could deepen recessionary pressures without equipping the economy to withstand the imminent trade disruptions.' Although the government's fiscal space remains limited, an over-reliance on monetary policy to counteract trade barriers would neither be prudent nor effective. Mitchell believes the focus should remain on defending economic stability through fiscal prudence and resistance to over-tightening monetary policy in relation to inflation. Furthermore, policymakers should prioritise diplomatic engagement and trade negotiations. 'While efforts to curb inflation are vital, the scope for interest rate hikes in response to global trade tensions and tariffs is limited. Such measures risk further slowing economic growth, increasing unemployment, and undermining investor confidence,' Mitchell said. 'A prudent approach would involve safeguarding industry competitiveness and fostering diplomatic solutions, recognising that the health of South Africa's economy hinges on resilient trade relations and sound fiscal management rather than aggressive rate hikes amid uncertain international conditions.' IOL Business
Eyewitness News
9 hours ago
- Business
- Eyewitness News
Kganyago calls for emerging markets, developing countries to address insurance protection gap
JOHANNESBURG - South African Reserve Bank (SARB) governor Lesetja Kganyago has called for emerging market and developing economies to urgently address the widening insurance protection gap in the face of growing natural disasters. The calls from Kganyago and other central bank governors come amid an alarming increase in natural catastrophes, including hurricanes, typhoons, wildfires, and floods across the world. ALSO READ: SARB's Kganyago says global debt crisis had shifted into a new paradigm South Africa is among countries recently devastated by deadly floods, with more than 400 lives lost in KwaZulu-Natal in 2022 and 100 lives claimed in June's floods in the Eastern Cape. Climate action, financing, and insurance gaps are on the agenda at the G20 finance track meetings currently underway in KZN on Friday. Kganyago addressed some delegates on the matter on the sidelines. 'For central banks, policymakers, and supervisors, bridging this protection gap is part of building macro financial resilience.' President of the World Bank Group Ajay Banga said the cost of uninsured losses in natural disasters ends up on the public balance sheet as debt. 'Insurance can help but for insurance to work, high quality development is a necessary precondition. It simply cannot function in the face of poor infrastructure, unreliable data or chronic underinvestment. Without that foundation, insurance premiums would just be too expensive.'
Eyewitness News
5 days ago
- Business
- Eyewitness News
Concerns about global uncertainty weigh heavy on minds of fiscal, monetary policy leader
JOHANNESBURG - Concerns about global uncertainty are weighing heavy on the minds of fiscal and monetary policy leaders. Finance ministers and central bank governors are gathered at the G20 finance track meeting in KwaZulu-Natal on Thursday. It comes after a series of meetings with the deputies wrapped up on Wednesday. This is the final finance track meeting in the country before the leaders' summit in November. Minister of Finance Enoch Godongwana opened the meeting in no uncertain terms about the complexities of the current global financial landscape. 'We meet at a time of fragile economic growth. While inflation is gradually moderating and financial conditions have started to stabilise in some regions, uncertainty continues to weigh heavily on global growth prospects. Rising trade barriers, persistent global imbalances and new geopolitical risks are certainly concerns.' South African Reserve Bank (SARB) Governor Lesetja Kganyago said the continued pressure could push decision makers into a tighter corner. 'Inflation remains higher than desired and persistent. Central banks have to navigate what uncertainty means for the price and financial stability mandates. I'm hopeful that our discussions here today will shed more light on our challenges.' Some policymakers believe part of the solution is lowering tensions and international trade barriers, and the prevention of further global fragmentation to help boost economic growth.
IOL News
10-07-2025
- Business
- IOL News
5. 2% annual inflation in South Africa's residential property prices reported for February 2025
For a first-time buyer, investor or seller, understanding the nuances of regional property trends is crucial. Image: ANA Archives The annual national residential property price inflation was 5.2% in February 2025, marginally down from a revised 5.3% in January this year. The Residential Property Price Index February 2025, released by Statistics South Africa (Stats SA) on Thursday, showed that the residential property price index (RPPI) increased by 0.4% month-on-month in February. 'The main contributors to the 5.2% annual national inflation rate were Western Cape (8.5% and contributing 3.3 percentage points) and Gauteng (2.5% and contributing 0.9 of a percentage point). "The RPPI for all metropolitan areas increased by 4.9% between February 2024 and February 2025. The main contributors to the 4.9% annual inflation rate for metropolitan areas were City of Cape Town (7.6% and contributing 2.7 percentage points) and City of Johannesburg (2.9% and contributing 0.6 of a percentage point).' The RPPI for properties sold for the first time increased by 5.5% between February last year and February this year. The index increased by 0.3% month-on-month in February. The RPPI for resold properties increased by 5.6% between the same period. The index increased by 0.4% month-on-month in February. The RPPI for sectional title properties increased by 3.2% between February 2024 and February 2025. The index increased by 0.4% month-on-month in February. The RPPI for freehold properties increased by 6.3% between February 2024 and February 2025. The index increased by 0.4% month-on-month in February. The key takeaway from the February 2025 Stats SA report is the slight dip in annual residential property inflation from 5.3% to 5.2%, alongside a modest 0.4% month-on-month increase, says Dr Meshel Muzuva, an academic programme leader for the School of Business Excellence at the Management College of Southern Africa. 'While the change is minimal, these figures suggest that property prices are beginning to stabilise after a period of more rapid growth. This points to a market adjusting to current economic conditions, particularly rising living costs, interest rates, and affordability constraints,' Muzuva said. Looking ahead, Muzuva said South Africa can expect the property market to grow steadily in the short to medium term. She said key macroeconomic factors at play are the interest rate cuts as the South African Reserve Bank (SARB) has eased the repo rate to 7.25% as of late May, with a prime lending rate of 10.75%, marking the fourth consecutive cut since September 2024. She added that a further 25 bps cuts, possibly to 10.50% prime, are anticipated through 2025, which makes borrowing slightly cheaper, which could help boost home buying in the coming months. The academic programme leader said the inflation dynamics were also at play, with CPI around 2.8 to 3.2%, SARB is comfortably within its target range, creating room for more monetary easing. 'Given that real house prices have struggled for much of the past few years, with weak transaction volumes and slower recovery relative to nominal gains, Global Property Guide believes the resumption of interest rate cuts should gradually boost market confidence, especially for first-time buyers.' Muzuva said it will be important to monitor how consumer confidence, interest rates, and employment levels evolve this year. She said should the SARB move toward interest rate cuts in response to easing inflation, this could stimulate renewed activity in the residential property market. On the other hand, she said if macroeconomic uncertainty persists, SA might expect continued caution among both buyers and sellers. 'The February RPPI suggests the property market is settling into a more balanced phase, no feverish boom, but a healthier, more measured trajectory. Watch for further repo rate cuts and CPI stability, which together could lay the groundwork for renewed market momentum, especially in key metro areas. "For buyers, sellers, developers, and lenders, it's a time to be strategically positioned, keeping a close eye on macro signals to make well-timed moves,' Muzuva said.
Bloomberg
09-07-2025
- Business
- Bloomberg
Citi Says South Africa Central Bank Could Lower CPI Goal in July
The South African Reserve Bank could lower its inflation target as soon as its policy meeting at the end of this month, according to Citigroup Inc. 'We recently wrote that the SARB would likely drop the inflation target in the third quarter' to 3% — with a possible 1% plus-or-minus tolerance band — from its current 4.5% goal, said Gina Schoeman, the bank's economist for South Africa. 'We believe there is a reasonable chance' of this happening at the upcoming meeting.
