Reserve Bank gets all 2.0

The South African Reserve Bank has caught up with the internet and is now offering a webcast of its MPC meetings. MPC meetings are, let's face it, deathly dull. No-one except real finance geeks would watch it if it wasn't for the fact that the decisions of the MPC have such far reaching effects on us. The MPC sets the interest rate and that sets how much our credit costs us. Some of the things that can be affected by a change in the interest rate are:

• Your homeloan
• Your credit card
• Your short term loans

Now when the MPC changes the interest rate and they are expected to again this week, then there may be savings for you in the three things mentioned above. However these savings are not always passed on to the consumer and it is always a good idea to check with experts and see if there can be a reduction in what you pay and how you can get it. Often you will have to ask for the newer better rate, but as the interest rate goes down it costs the banks less to borrow money from the Reserve Bank and these savings should be passed onto you the consumer.

The interesting thing for Justmoney is the live webcast aspect the SARB has introduced, it may not have the greatest layout, and it may not be especially alternative browser friendly but the Bank is trying to get with the future and bring a bit of 2.0 to the MPC at SARB. You can watch live streaming financial dullness right on your own screen. A perfect way to spend Thursday afternoon, especially if you have a homeloan, a credit card or a short term loan. That said finance geeks like us here at Justmoney we look forward to the MPC meetings and always watch Uncle Tito lay it down, so why don't you join us Thursday 25th June at 3pm for the live webcast.

Interest rate cut by one percent

The South African Reserve Banks Monetary Policy Committee (MPC) has been meeting Wednesday 27th and Thursday 28th of May 2009. The MPC determines the interest rate at which the Reserve Bank lends to the commercial banks. They have reduced the rate by 100 basis points. There has been a bunch of bad economic data recently, with inflation not falling and the economy entering a recession there have been calls to cut the rate. The major effect of a rate cut will be felt in your home loan and this is it will save you on a 20 year bond

• R500 000 home loan = R 344.49 a month in savings
• R750 000 home loan = R 516.74 a month in savings
• R1 000 000 home loan = R 688.98 a month in savings

There have been calls in the financial press for cuts of between 50 basis points and 150. The rate itself was cut by 100 basis points, or one percent, in the end. The general prediction was for 100 basis points or 1%. The analysts got it right! The Reserve Bank has been pursuing a policy of inflation targeting and while consumer inflation was steady at 8.4% Producer inflation was down by 2.9% April 2008 to April 2009. So it's not as bad as it could be. The Reserve Bank has so far followed a calm and prudent policy without too many shocks and this policy has sensibly been continued today.

The Reserve Bank may now end its policy of inflation targeting, but a massive cut in interest rates can lead to our currency getting devalued by speculators. Also it seems that credit extension is still growing which means that the rate cuts that have already happened are starting to take effect and that the banks are still increasing lending even if it is not at the levels seen in December 2008. Inflation is expected to hit its target band of 3% - 6% towards the end of this year and the beginning of 2010 but there have been some calls to change the target band upwards by one percent making a more realistic target that we are more likely to be able to hit.

Interest Rates cut by 100 basis points

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Interest rate cut by 100 basis points

The MPC (Monetary Policy Committee) has been meeting today and yesterday.

They announced that the new interest rate has been cut by 100 basis points

This new interest rate will come as welcome news to home owners and those with interest rate linked accounts.

It means that money has just got a bit cheaper to borrow and that it won't cost you as much to pay back any more.

Expectations for the cut varied from 50 basis points to 100 basis points. The major caution that Uncle Tito, The Guv, saw was that there could be a currency risk involved in cutting the interest rate too far too fast.

Business Report had an article stating that the rate cut would not affect the Rand. This was the opinion of interviewed economists from RMB Currency. They were of the opinion that with some many other countries already cutting their rates to zero or nearby, then we wouldn't really feel the difference if even a full 100 basis point cut was decided on. The size of the cut indicates how much the Reserve Bank intends cutting interest rates down to at the end of this cutting cycle. The cut of can be seen as an aggressive cut that signals a plunge to interest rates of around 7% at the end of this cycle.

The rand is not expected to suffer because of this as it is looking very strong at the moment.

iAfrica carried a version of this story, noting that the market has already discounted these expected rate cuts in.

The Times noted that the JSE was edging up in anticipation of the rate cuts this morning the 5th of February. Interest rate stock were apparently showing some signs of buying activity but the rest of the market was quite flat with not a lot of activity going on.

MyRoof.co.za blogged a call for a 100 basis point cut this morning, and were holding their breaths waiting for the decision itself.

The major effect that a cut like this will have on the consumer is in your bond, if you are on a linked rate bond, what you have to pay every month just got less.

Justmoney reckons that you should be able to save money every month by speaking to a home loan specialist who can help you negotiate a better rate.

The other major effect will be on those credit cards that link their interest to the Prime and Repo rates.

Watch this space in the next few days, you might find that what the cheapest credit card in South Africa has changed. However, a small cut doesn't take away the fact that stuff is still expensive, there is a financial crash going on, and a budget can go a long way to helping you through it all.