Although inflation data this week points to the prospect of a rate cut on December 11, credit extension data today appears to be offering an alternative view.
There is still a school of thought that says rates will only be cut in February as the central bank will first want to see the effect of the changes to the consumer price index (CPI) basket from next year, and also how the global economy goes from here.
The central planners will not like the fact that CPIX (CPI excluding interest rates on mortgage bonds) has been above their six percent target for a 19 months.
Senior economist from Efficient Group, Fanie Joubert, said after the release of credit data that this data was a possible reason why rates may not be cut next month.
The data showed that credit extended to the private sector grew at a rate of 16,17 percent year on year in October from 16,28 percent in September.
"A big worry is the household category, with a big part of it mortgages to households," said Joubert.
He said that the expectations of lower rates next year may have led to a bit of speculative activity in the property market.
This certainly is not news the central bank will want to see. The words "housing market" and "speculation" are taboo at the moment in central bank circles.
There is thus no doubt that the chances of the December cut have receded a bit. - I-Net Bridge