Economists predict unchanged interest rate

[newsroom]

Pretoria – Economic experts are predicting that the Reserve Bank’s Monetary Policy Committee (MPC) will likely decide to keep rates unchanged after its two-day meeting in Pretoria.

The MPC meeting will kick off tomorrow.

Standard Bank senior economist Dr Johan Botha said it was now at a knives’ edge. “We know that the bank will be somewhat conservative if they wait for the next meeting where they will have additional data like GDP (Gross Domestic Product) and inflation expectations.

“Our view is that there will be no change.”

Investment Solutions economist Chris Hart told BuaNews: “I think not much is to be expected on rates however I wouldn’t be surprised if there’s a cut even though it’s unexpected,”

Currently the repo rate stands at 6.5 percent. It has been slashed by 550 basis points since December 2008.

In April, Governor Gill Marcus said that the scope for further easing of interest rates was limited and that the repurchase rate is likely to remain stable for some time.

Nedbank also expects the central bank to keep rates as is.

“Although there is a 45 percent chance of a cut given lower inflation and inflation expectations, a relatively firm rand and continued uncertainty about economic prospects both locally and abroad, conditions have probably changed materially enough from April, when the Governor stated that further easing would require a major improvement to the inflation outlook and its risks, including markedly lower than expected output on expenditure trends, and a sustained further appreciation of the rand exchange rate”.

Since that time the rand has weakened on a trade weighted basis and the economy has surprised to the upside, although risks to the outlook remain, Nedbank said.

The nine-member committee’s decision will be made public on Thursday afternoon. - BuaNews