View Poll Results: How ready are you for the day interest rates go up?

Voters
16. This poll is closed
  • I'm so ready I can't wait for the day.

    1 6.25%
  • I think I got this one under control.

    7 43.75%
  • Oops! Just had a spasm - got to go to the bathroom.

    5 31.25%
  • It's not going to happen.

    3 18.75%
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Thread: How would an interest rate increase affect you?

  1. #21
    just me duncan drennan's Avatar
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    For more info on Feb's CPIX, you can have a look at RMB's data brief. They are predicting a breach through 6%, up to 6.2% in April. Also, for some interesting reading, have a look at www.fnb.com/economics
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  2. #22
    Site Caretaker Dave A's Avatar
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    I get the sense that those numbers may be an anomaly as opposed to signs of a reversal in the general trend.
    Last edited by Dave A; 29-Mar-07 at 09:34 AM.

  3. #23
    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    I get the sense that those numbers may be an anomoly as opposed to signs of a reversal in the general trend.
    I agree. They don't state that explicitly, but they do mention a couple of other things (such as prediction for March which is 5.7%, and predicted 6.2% in April), which indicate a more sinister rate meeting than most will expect.

    I'm pretty sure we'll see either a 0.5% increase in rates (most likely) or some sort of change to the way the reserve bank lends money to the banks (to curb credit growth).
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  4. #24
    Email problem stephanfx's Avatar
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    It is almost 4 weeks ago, any new news pertaining this? Are there any news to support this, I know the petrol has gone up now, and that a interest rate hike is immanent, but is there any indication as to when maybe and how it will affect businesses in general?

  5. #25
    just me duncan drennan's Avatar
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    The MPC meets every two months (meeting dates for this year). We'll have to wait and see what the changes are to the inflation outlook at the next meeting. As to the effects, well, that's hard to gauge — not even the economists can agree
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  6. #26
    Site Caretaker Dave A's Avatar
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    This article is not very encouraging in terms of short term prospects on interest rates.
    Borrowers will almost certainly be disappointed in their hopes that prime and mortgage rates will peak at their current levels of 13 percent.

    Rates in both money and bond markets are pointing to prime at about 13.5 percent by the end of the year - in line with the Reuters' consensus forecast of 11 of South Africa's top economists, which put prime at 13.5 percent in the third quarter, before a decline to 13 percent in the second quarter of 2008.

    One important pointer is the difference between the yield on the benchmark R153 bond and the inflation-linked R189 bond, which measures inflationary expectations.

    This differential was currently 620 basis points, said Ian Cruickshanks, the head of Nedbank Capital's strategic research unit.

    In other words, the bond market expects inflation to remain above the ceiling of the Reserve Bank's target range of between 3 percent and 6 percent, which increases the probability of a further rate hike.

    The central bank raised its rate by 250 basis points to 9.5 percent between June last year and June this year, in an attempt to prevent its benchmark CPIX (consumer price index minus mortgage costs) breaching the ceiling.

    If CPIX inflation remains above the ceiling, more hikes will be needed to rein it in.
    full story from Business Report here
    I do hope that some official numbers emerge before the next central bank meeting that might indicate the extent of the NCA impact.

  7. #27
    Silver Member Graeme's Avatar
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    The USA Capital Market - a distant rumble of thunder

    You will all be familiar with developments in the US “Sub-Prime” market - where irresponsible financial institutions have been dishing out mortgage finance to very poor credit risks, with these people now starting to default on their loans; over a million to date, and rising fast.

    One of the many advantages of being retired is being able to watch TV in the afternoon (morning in the USA) and watch news there as it develops. I have watched Bernanke (Chairman of the US Federal Reserve) giving testimony before Senate House Committees on several occasions lately and whilst he has been very careful not to frighten the capital markets, some of what he has said about the sub-prime market, or rather what he has not said, is beginning to fill me with unease. These things always start slowly but when panic sets in a small trickle of stones can become an avalanche very quickly.

    There is little reason why increasing American loan defaults should trouble us unduly in SA; our biggest trading partners by far are the EU and the UK, but it is a fact that unease in the USA can cause a sharp intake of breath on capital markets here.

    If I were in business instead of sitting at home and watching my investments, and if I were in the process of arranging development capital finance right now, I would be inclined to try to get it all signed and sealed at a fixed interest rate chop-chop, and I would not be taking on any loan servicing commitments that I was not very confident of meeting.

    I’ve been investing money for forty years now and believe me, history repeats itself with monotonous regularity. I’ve seen this all before. I’m not doing any drastic re-arrangements right now, but I’m not touching any risky stuff either. Caveat emptor!

  8. #28
    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Graeme View Post
    I’ve been investing money for forty years now and believe me, history repeats itself with monotonous regularity. I’ve seen this all before.
    And it starts with Wall Street while we slept.

    As you have said to me so often - fundamentals.
    You're getting better at reading the timing on these calls, Graeme.

  9. #29
    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    And it starts with Wall Street while we slept.
    Hmmm, had to search around a bit for this,

    New York - Wall Street suffered its second-biggest plunge of the year on Thursday, leading global markets lower as investors fled stocks amid increasing uneasiness about the mortgage and corporate lending markets.

    The Dow Jones industrials briefly fell more than 400 points, while Treasury yields plunged as investors moved money into bonds.

    Investors who had been able to shrug off discomfort about subprime mortgage problems and a more difficult environment for corporate borrowing appeared to finally succumb to those concerns.

    The Dow's drop is the biggest since it plummeted 416 points on February 27 after a nearly 10% decline in Chinese stock markets.

    Feeding the selling were concerns that higher corporate borrowing costs will curb the rapid pace of takeovers that have driven major indexes this year.

    Investors also feared the sluggish environment for home sales and continued defaults in subprime loans would spur debt defaults and weigh on corporate earnings.

    "Worries that have been out there for the past couple of years are coming to a head right now," said investment strategist Edward Yardeni, president of Yardeni Research Inc. "It's show time."

    Full story on Fin24
    Last edited by duncan drennan; 27-Jul-07 at 09:09 AM.
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  10. #30
    just me duncan drennan's Avatar
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    Well, all looks set for another rate hike in August. Interestingly enough the NCA seems to have had little impact on credit extension.

    Growth in demand for credit by South Africa's private sector quickened to 24,92% year-on-year in June, data showed on Tuesday, hardening the case for another interest rate increase next month.

    The Reserve Bank said credit demand growth was a touch faster than May's 24,84% increase, while during the same period, the broadly defined M3 measure of money supply grew by 23,35% compared to 22,67% the previous month.

    "These [credit] numbers are a lot higher than our expectations and what the market expected. We had thought we would see the effects of the NCA (National Credit Act) come through in these numbers. It looks like there is no effect at all," said Russell Lamberti, economist at ETM.

    Full story on M&G
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