Pre-MPC forecast
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2012
Thu
19
Jan
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By Tendani Mantshimuli, consumer economist, Liberty
The SARB’s monetary policy committee has begun with its first meeting of the year, with the decision expected on Thursday afternoon. On the face of it there haven’t been substantial changes in both the domestic and international economic developments that warrant a change in the monetary policy stance. The troubles in Europe with a threatening recession have been a matter of concern for the bank throughout 2011. It was understood that the bank always had ammunition to act if deterioration in the European growth prospects posed a threat to domestic growth. Had that scenario played out, the bank would undoubtedly have cut interest rates to support domestic growth. This is still going to be largely the bank’s stance into 2012; keep a careful eye in developments in Europe and act appropriately should the need arise.
Alongside growth concerns there is rising inflation which happens to be the bank’s primary mandate. Inflation breached the target in November and is expected to remain outside target during the first half of 2012. However, given the uncertain economic recovery for this economy increasing interest rates is not an option for the bank now. However, of concern are the rising food and energy prices which might be exacerbated by a weakened rand. Here at home administered prices are always a concern.
What is the decision likely to be on Thursday? We’re expecting the SARB to keep the repo rate unchanged at 5.5% and the prime overdraft rate at 9.00%. The current concerns in both the global and domestic economy have been largely anticipated so the bank will keep rates on hold on Thursday and in the coming meetings until there is a significant deterioration in the growth prospects, in which case they would cut rates.
Source: Fleishman-Hillard | Digital. Integrated. Global.
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