ECONOMISTS EXPRESS CAUTION ON RATE CUT
THE possibility of a repo rate cut today is low, economists said yesterday, citing high oil prices and the change in leadership at the Reserve Bank.
Cosatu, on the other hand, is calling for a "farewell" 200 basis point rate cut by outgoing governor, Tito Mboweni.
Mboweni, who has steered the Bank since 1999, makes way for Gill Marcus - currently Absa chairperson - following her appointment by President Jacob Zuma last month.
Economist Mike Schussler said overall commodity prices, including oil, are on an upward trend, which was "a bit of a concern".
The oil price edged back towards $70 (about R565) a barrel yesterday. In January it was between $37 and $50 a barrel.
The rate cut debate was sparked yesterday by the release by Stats SA of the June retail trade sales figures, which fell by 6,7percent year-on-year from a revised 4,4percent in May.
Retail sales were down 6,0percent in the three months to June, compared to the same period a year ago.
"I think this confirms that the second quarter was another negative quarter in terms of consumer spending," said Citadel economist Dave Mohr. "The South African economy was still in recession and GDP probably fell further."
The data lends weight to the argument for more interest rate cuts this year, although most analysts expect the Bank to leave the key repo rate unchanged at 7,5percent when it concludes its two-day meeting which started yesterday.
While he acknowledged the importance of cutting interest rates, Schussler said a rate cut was "unlikely" to be announced by the monetary policy committee today.
"We will probably get another 50 basis points rate cut in September as the Reserve Bank is still gathering evidence on the overall performance of the economy," he said.
He also said there were signs that "the slowdown is slowing down" and forecast a year-on-year growth in retail sales in the fourth quarter.
Efficient Group economist Dawie Roodt said: "Interest rates are low; inflation is high and coupled with high wage increases, I don't see a possible cut."
Leaving rates steady again today would anger unions who have clashed with Mboweni over the Bank's failure to meet their demands for hefty cuts and who celebrated news that he will leave the post in November.