22. Juni 2009

Economists Predict Repo Rate Cut

Economists predict the South African Reserve Bank (SARB)'s Monetary Policy Committee (MPC) is likely to announce a 50 basis point cut in the repo rate, when it meets this week.

Standard Bank economist Danalee van Wyk predicts a half a percentage point cut is likely when the Central Bank announces its decision on Thursday.

"We think a 50 basis point cut is on the cards since the bank last month signaled that major cuts were likely to fade," said Ms van Wyk.

She said this is likely due to rising inflation concerns as well as expected electricity tariff amendments. "We believe that 50 basis point is warranted," she said.

Her sentiment was shared by Nedbank economist Nicky Weimer. "The economy is weak and we predict a 50 basis point reduction," she said, adding that the bank further expects another cut when the MPC meets again in August.

Investment Solutions senior economist Chris Hart told BuaNews that since the country's economic growth had plunged, they expect a 50 basis point cut.

"We are predicting a 50 basis point cut as the strength of the economy is weighing on the central bank. Growth has plunged reducing the risk around inflation. However the bank's flexibility has been hampered because inflation itself has not come down," said Mr Hart.

The Reserve Bank has in the last six months reduced the repo rate by 450 basis points. If the bank cuts the repo rate by 50 basis point,this will see it stand at 7 percent. (ALLAFRICA)

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