Economists See Possible End of Rate Cuts

November 4 - On Thursday, the South African Reserve Bank's Monetary Policy Committee (MPC) decided to leave interest rates unchanged, setting the repo rate once more at 7%.

Economy analysts commented on the MPC's decision, among them Carmen Altenkirch, speaking for Nedbank.

"Despite a dovish statement, which highlighted the 'tentative' nature of the recovery and the slight deterioration in recent economic data, the MPC opted to keep rates unchanged," said Altenkirch. "The committee appears to have adopted a similar stance that that taken at last month's meeting, opting to wait and see whether indications that the global and domestic economy are continuing to recover will be confirmed, or whether August's weaker manufacturing and retail figures are a reversal of the positive trend."

Altenkirch said that the bank still believes that there is one more cut this cycle on the books, although predicting the exact timing will be difficult.

"Should the economy continue to shed jobs, which will put further downward pressure on domestic demand over the coming months and dampen the recover, the MPC may believe that it would prudent to cut rates again," added Altenkirch.

Freddie Mitchell of the Efficient Group, said that the unchanged rates were "mostly expected".

"Like the government said, there are still upside risks to inflation, and that is why it was left unchanged," he commented.

Not everyone is so accepting of the MPC's current policy. Debt ridden South Africans struggling with home loans are angry that the Reserve Bank did not take their plight into account and lighten their monthly premium loads.

11/4/2009 8:48:52 AM