Rating agencies are worried about the direction of economic policy - economist

On Wednesday evening, Reserve Bank Deputy Governor Francois Groepe said that countries that have been relegated to junk status by rating agencies have often ended up with interest rates a full 1% or 100 basis points higher as a result.

Isaac Matshego, an economist at Nedbank, explains the impact on interests rates subsequent to South Africa being downgraded to junk status by rating agencies, S&P Global and Fitch.

Stephen Grootes: What kind of impact can we expect to our interest rates

The Reserve Bank actually did do some research last year, indicating that a drop into sub-investment grade, which would raise South African interest rates by about 110 basis points. But basically what we expect is that interests rates are going to go higher because our cost of borrowing is higher.

Isaac Matshego, economist at Nedbank

But we must remember that most of our borrowing is in local currency so we are not likely to see that full impact of that percentage point.

Isaac Matshego, economist at Nedbank

Stephen Grootes: When interest rates go up by that much, it's going to have a big ripple effect across our entire economy?

The banks will pass some of that cost onto the consumer and the consumer will definitely feel that impact but I must highlight that the cost of borrowing particularly for mortgage in South Africa is driven mainly by changes in the prime rate. So it's all going to be the response of the Reserve Bank to this junk status.

Isaac Matshego, economist at Nedbank

Stephen Grootes: What would it take to get us out of junk status – I imagine it really is about politics at the moment?

The rating agencies are worried about the direction of economic policy and that is driven mainly by the political noise we've heard.

Isaac Matshego, economist at Nedbank

Listen to full interview in the audio below:


Recommended

by NEWSROOM AI
Read More
Making people profitable

Making people profitable

Nikiwe Bikitsha stops by the offices of the Chairman of Phillips Consulting Limited to get insights into the Nigerian economy.

Opinion: What whites can learn from Anti-Zuma protests

Opinion: What whites can learn from Anti-Zuma protests

Zuma's racist rhetoric about the recent mass protests is diverting from the real issue of a corrupt and morally defunct state.

MPs should be protected from intimidation - Holomisa

MPs should be protected from intimidation - Holomisa

United Democratic Movement leader says ANC intimidated MPs in public, therefore, they should be protected through secret ballots.

Mbeki calls on ANC MPs to vote in people's interest in motion of no confidence

Mbeki calls on ANC MPs to vote in people's interest in motion of no confidence

Former President Thabo Mbeki says MPs serve in Parliament as representatives of the people.

Mbete doesn't have powers to grant voting through secret ballot - Parliament

Mbete doesn't have powers to grant voting through secret ballot - Parliament

UDM will be approaching the Concourt for permission to vote through a secret ballot during the motion of no confidence in Zuma.

South Africa grilled by ICC over decision to not arrest Al Bashir

South Africa grilled by ICC over decision to not arrest Al Bashir

The SALC brought an urgent application to have President Al Bashir arrested in June 2015.

Is your money in the bank safe? Banking Association on S&P's downgrade of banks…

Is your money in the bank safe? Banking Association on S&P's downgrade of banks…

S&P has downgraded South African banks. Banking Association of SA’s Cas Coovadia discusses the development on The Money Show.

How to ensure your small business survives the current situation in South Africa

How to ensure your small business survives the current situation in South Africa

Small business guru Pavlo Phitidis advises entrepreneurs on how to adapt to a country in flux.

Clients do not have to worry about banks downgrade  - Cas Coovadia

Clients do not have to worry about banks downgrade - Cas Coovadia

The Banking Association of South Africa's (Bassa) Cas Coovadia says banks have enough capital to handle the downgrade.

Tips to assist you if your partner has ADHD

Tips to assist you if your partner has ADHD

Here are common problems you may experience with a partner who suffers from attention deficit disorder and what you can do.

SA clothing and textile industry drops from 200 000 to 19 000 jobs - researcher

SA clothing and textile industry drops from 200 000 to 19 000 jobs - researcher

Rob Davies, Minister of Trade and Industry commits to protecting jobs in clothing and textile industry.

How SA’s reshuffle to ‘junk status’ will affect your pocket

How SA’s reshuffle to ‘junk status’ will affect your pocket

Anxious The Money Show listeners are asking about the effect of the ratings downgrade their finances.

'We need 50 brave souls in the ANC to vote with their conscience'

'We need 50 brave souls in the ANC to vote with their conscience'

"We know people are scared. They [ANC MPs] need to see that South Africa is behind them," says Sygnia's Magda Wierzycka.

What being downgraded to junk status really means

What being downgraded to junk status really means

Wits Professor Patrick Bond and Financial Mail's Sikonathi Mantshantsha share their insights into the latest S&P downgrade.

SA junk status is treason against the poor- economist

SA junk status is treason against the poor- economist

International rating agency, Standard & Poor’s, has downgraded South Africa's credit rating to junk status.

Zuma's Cabinet reshuffle a low blow on SA's poor, says Archbishop Makgoba

Zuma's Cabinet reshuffle a low blow on SA's poor, says Archbishop Makgoba

Archbishop Thabo Makgoba says that poor South Africans stand to lose the most following President Jacob Zuma's Cabinet reshuffle.

'Jacob Zuma’s actions are keeping the cost of debt higher than it needs to be'

'Jacob Zuma’s actions are keeping the cost of debt higher than it needs to be'

The Money Show's Bruce Whitfield interviews FNB Economist Mamello Matikinca about why the Sarb decided not to cut interest rates.

‘Rand dropped 20 cents before we finished reading that headline’

‘Rand dropped 20 cents before we finished reading that headline’

Standard Bank's Goolam Ballim, RMB's Greg Kennelly, Business Unity SA’s Jabu Mabuza and futurist Daniel Silke weighs in.

'CPS lures grant recipients into buying insurance (and taking out microloans)'

'CPS lures grant recipients into buying insurance (and taking out microloans)'

Cash Paymaster Services shareholder Net1 UEPS is using the database of grant recipients to cross-sell services, says Sygnia’s CEO.

Popular articles
The Polo GTI has got that vrrrpha mentality written all over it - Jacob Moshokoa

The Polo GTI has got that vrrrpha mentality written all over it - Jacob Moshokoa

Automotive Journalist, Jacob Moshokoa shares his views of the Polo GTI 2018, and chats about the vrrrpha mentality among young men

'Drug traffickers are used as a decoy'

'Drug traffickers are used as a decoy'

Director at advocacy group Locked Up SA, Patricia Gerber describes the extent of drug trafficking from South Africa.

Yet another wet and cold weekend for Gauteng warns weather service

Yet another wet and cold weekend for Gauteng warns weather service

Gauteng residents are warned to brace themselves for another weekend of heavy rain, possible hail and damaging winds.

[Watch] SA choir stuns with isiZulu cover of Ed Sheeran’s ‘Shape of You’

[Watch] SA choir stuns with isiZulu cover of Ed Sheeran’s ‘Shape of You’

Khabazela shares some of the most popular tweets, posts, and videos on 'What's gone Viral'.

Calls for more women to come forward and testify at Timothy Omotoso's trial

Calls for more women to come forward and testify at Timothy Omotoso's trial

Thanduxolo Jindela explains why he is running a campaign to encourage more of Omotoso’s victims to come out and testify.

10-year-old maths whiz Sbahle Zwane gets a scholarship from Curro school

10-year-old maths whiz Sbahle Zwane gets a scholarship from Curro school

Azania Mosaka catches up with Sbahle Zwane's mother to hear about developments with his schooling.