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Interest rates are unlikely to rise, say economists

By unknown | Jan 31, 2007 | COMMENTS [ 0 ]

Zweli Mokgata

Zweli Mokgata

South African consumers and homeowners might get a welcome breather next month. That's if the reserve bank's monetary policy committee (MPC) takes note of recent economic data pointing to stabilising economic growth at its next interest rate meeting in two weeks' time. But economists say the decision will not be easy.

Figures released by the bank yesterday showed that both growth in demand for credit by South Africa's private sector and money supply slowed in the year to December, and inflation figures released last week also surprised on the upside.

According to Nedbank's economists Dennis Dykes and Annari de Waal, "the lower-than-expected credit figures, recent subdued inflation data and the improved inflation outlook further support the view that the reserve bank's MPC will hold rates steady at its meeting in mid-February. We currently anticipate that interest rates will remain unchanged this year."

Independent analyst Kagiso Legoale agreed, saying that the most likely action would be to keep interest rates on hold.

"The oil price is quite stable below $55 a barrel and the rand is still solid against the dollar at about R7," he said.

"If there are any changes it would be a 50 basis points hike, and that would only be the result of last month's credit spending." - With I-Net Bridge


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