Moody's: Don't bank on more rate cuts

Johannesburg - The Reserve Bank's repo rate cut on Thursday is likely to have been the last of this monetary easing cycle, according to Moody's Analytics.

Associate economist Mekael Teshome said on Friday that the next move is forecast to be an increase.

The latest rate cut brings the repo rate to 5.5% and the prime lending rate to 9%. 

"We expect the Reserve Bank to hold rates long enough to safeguard the recovery and begin tightening in the third quarter of next year," Teshome said.

Teshome said that macroeconomic conditions had not changed much since the central bank's September meeting.
 
The strong rand, low inflation and sluggish economic recovery were some of the reasons that contributed to the bank's decision to further lower rates.

However, other economists have suggested that if inflation remained within the 3% to 6% target band, rand strength continued and global and local economies did not recover as well as expected, the bank might give further stimulus.

The South African economy has been struggling to recover, as the strong rand impacts on sectors such as manufacturing.

It grew by 4.6% in the first quarter. Growth then slowed to 3.2% in the second quarter.

"Indicators point to a lacklustre South African recovery in the near term. Manufacturing will likely remain on weak legs for months," Teshome said.