THE Bureau for Economic Research at Stellenbosch University projected yesterday that the repo rate will remain on hold throughout 2010 - with mild hikes (100bps in total) expected in the first half of 2011.
In its economic forecast for the first quarter of 2010, BER economist Hugo Pienaar said: "Recent data showing a return of (mild) job growth in the fourth quarter last year and positive manufacturing production figures have reinforced our interest rate call.
"However, a scenario where the tariff hikes granted to Eskom are in line with the Reserve Bank's 25percent assumption and fourth quarter last year GDP growth (especially if it is driven by consumer demand weakness) surprises on the downside, could result in a 50bps rate cut in March."
The National Energy Regulator of SA's tariff decision as well as the fourth quarter last year GDP numbers will be available at the time of the next MPC meeting which takes place on March 25.
The BER said the CPI should ease to an average of 5,3percent in 2010, from 7,1percent before accelerating to 5,9percent in 2011.
In its report the BER said producer prices, which are more sensitive to commodity price trends, are projected to move in the opposite direction by averaging 5,3percent in 2010. - I-Net Bridge