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Johannesburg - While no change in the repo rate is expected on Thursday and again in October, there is a chance that the first 50 basis point cut could be seen in December if events play along, according to chief economist from FNB, Cees Bruggemans.
"So August no change. Perhaps October no change. But December 2008 could see the first 0.5% rate cut, with prime dropping to 15%, if events play our way, especially if the global credit crisis and commodity virulence could abate," he says.
"That would also nicely short-circuit the credibility problem of what to do in election month 2009," added Bruggemans.
He makes the point that this possibility only comes into view if growth weakness progresses, inflation peaks, global inflation turns more favourable and the global credit crisis abates.
He also makes the point that SA is not alone with a dilemma of rising inflation, weaker growth, concern about capital flow exposure and currency attacks.
"But some countries are taking radically different decisions," he concludes.
The consensus is for South Africa's repo rate to remain unchanged at 12% in August, according to a survey of 13 leading economists by I-Net Bridge.
The MPC begins its two days of deliberations tomorrow, with the final decision due just after 15:00 on Thursday.
Of the 13 respondents surveyed, a majority of ten felt the repo would remain unchanged, with three predicting a 50 basis point increase.
Most respondents also felt the tightening cycle will be over, but that if another increase happened, then August's increase would mark the end of the cycle.
The MPC increased the repo rate by 50 basis points to 12.00% in June - against a consensus expectation that the increase would measure 100 basis points after particularly hawkish comments from the central bank governor on May 28.
- I-Net Bridge