Three years without a single hike, then the MPC finally pulled the trigger at the end of May, prime now sitting at 10.5 percent, and word ahead of the 23rd is there’s a real chance of another quarter point. I spent enough years behind an Absa branch counter to know the clients who came through these cycles fine were never the ones glued to the announcement date, they were the ones who’d already worked out what a quarter point actually does to their repayment. On a R1.5 million bond that’s close to R250 more a month for every 25 basis points, so if July follows May you’re carrying roughly R500 extra before you’ve even looked at your data bill. My own bet is the SARB is watching the rand more than the inflation print and would rather look tough now than get caught off guard if it slides again. Anyone adjusting their budget ahead of the 23rd, or do you reckon they hold this time?
The rand call makes sense to me, they’ve held through worse inflation prints than this one when the currency was behaving. It’s the two years of everything else going up first that makes a small hike land harder now than it would have in 2019, there’s just no slack left in most budgets to absorb it quietly.
My guess is they hold on the 23rd but keep the door open for September, especially if the rand doesn’t cooperate. Either way, worth doing the sum on your own bond before the date rather than after, so it’s not a surprise on the statement.
This hits close to home, because when prime went up in May I felt it immediately, suppliers started charging me more for parts I import, and my till loan repayment went up too. People forget small business owners are basically walking interest rate indicators, we feel it before it even hits the news.
I’m with Daniel on this one, they hold on the 23rd but leave the door wide open for September. SARB isn’t going to shock the market twice in one year when the rand has actually been behaving.
But here’s my thing, everyone’s stressing about the hike itself but nobody’s talking about how townspeople actually cope. In Soweto guys are hustling on the side just to cover the gap, not waiting for SARB to be kind to them. You checking your budget for a possible hike, or just riding it out like most of us?