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May 24 2012 17:31
The Reserve Bank will maintain current interest rates, and a sizeable reduction in the local petrol price is expected, says governor Gill Marcus.
May 24 2012 15:29
The Reserve Bank will maintain current interest rates, says governor Gill Marcus.
May 23 2012 22:00
Economic liberation or the lack thereof is the most divisive issue in the country, according to a survey.
Johannesburg - The SA Reserve Bank needs to cut rates sooner rather than later, Nedbank Group's economic unit said on Wednesday.
Earlier, Statistics SA released data, showing that inflation (or CPI) declined to an annual 8.1% in January from 9.5% in the previous month.
This was higher than market expectations and "somewhat disappointing," Nedbank said.
However, this did not significantly alter its inflation forecast or its view that the Reserve Bank would opt to continue with aggressive interest rate cuts.
Tuesday's worse-than-expected GDP figure along with expectations that the economy would deteriorate further added impetus to the need to cut rates, it said.
"With the April MPC meeting over a month and a half away there is a good probability that an interim meeting will be held if evidence of a further deterioration in the economy accumulates," Nedbank said.
Over the course of the remainder of the year it expected a 350 to 400 basis point decline in rates.
Nedbank expected inflation to moderate over the coming months and saw it moving to below the reserve bank's target range (3% to 6%) by the middle of the year.
"By December inflation will probably move briefly outside the target range, mainly due to technical factors relating to the sharp decline in oil prices in late 2008."
Services inflation, which now had a bigger weight in the new basket used by Statistics SA, should continue to ease at a slower pace compared with headline inflation, due to the backward looking manner in which prices were set, Nedbank said.
"The pace of decline for goods inflation may also turn out to be slower than originally expected, due to the lower weightings of food and fuel."
Overall, the risk to the inflation outlook lay on the downside, Nedbank said.
"Should conditions both locally and globally deteriorate further, the drop in inflation could turn out to be steeper than anticipated as retailers may opt to cut prices in order to try and keep goods moving off their shelves."
Nedbank said a weaker rand could still provide some upside risk, but barring a massive depreciation, retailers would probably opt to cut margins rather than put up prices and see demand dwindle further.
- Sapa