Rates on hold, inflation cooling; what this means for your bond and budget

Last week, the South African Reserve Bank’s Monetary Policy Committee decided to keep the repo rate at 7 %. Inflation for August came in at 3.3 % year-on-year, down from 3.5 %. Suddenly, everyone’s uncle on WhatsApp is convinced we’re “winning the war on prices.” Hold your horses. This isn’t a fairy-tale ending. It’s only a pause, not a party.

What “rates on hold” is really about

The SARB didn’t freeze rates out of kindness. It is waiting to see if the cuts since September 2024 have finished rippling through the economy. Inflation looks chilled for now, but fuel, food, and the rand are the kind of friends who can ruin a night out with zero warning.

A stable rate doesn’t mean things are calm forever. It means the next move could hurt (or save you) even more.

So, your bond…

If you’re paying a bond on a floating rate, you’re safe for now; your instalment isn’t about to balloon, but don’t get too smug. Banks know margins shrink when cuts happen, and will find ways to claw back.

• Floating vs fixed: Floating stays put until the SARB blinks. Fixed? You’ve locked in whatever deal you shook hands on.
• Refinancing / new bond: Cooling inflation suggests future cuts could sweeten deals. But lenders still price in risk, so “cheap” is relative.
• Government bonds: Yields may drift lower if markets sniff cuts ahead, but South Africa’s debt baggage keeps them high.
• Real interest rate: With inflation easing, your debt costs in “real terms” feel a touch lighter. A touch, but not a miracle.

Your bond isn’t an island. Every repo ripple ends up in your monthly debit order.

What your budget cares about

Cooling inflation is nice, but it doesn’t pay for your Woolies groceries. Your budget still answers to:

• Fixed costs: Rates, levies, Eskom - none of them care about repo.
• Food & fuel: Volatile, volatile, volatile. One fuel hike and you’re back to tightening.
• Salary vs inflation: If your raise doesn’t outpace inflation, your “increase” is a fancy way of standing still.
• Credit costs: Your bank’s overdraft interest won’t budge just because SARB is chilling.
• Behaviour: If everyone thinks inflation is sorted, they’ll borrow, spend, and push prices up again.

What you should do

• Floating bond? Keep an eye on inflation and SARB meetings.
• Hunting for a bond? Shop around for margins, not just base rates.
• Budgeting? Leave room for food and petrol surprises. It will come sooner or later.
• Debt? Use the lull to tidy up credit and strengthen your bargaining power.
• Mindset? Don’t treat the pause as permanent. There's always a storm brewing.

The repo pause isn’t a happy ending.
It’s the cliff-hanger before the next episode.