Rate Cut To Be Announced

The information in this article is courtesy of the Cape Times (Another 1% rate cut on the cards – 24 March 2009)

A 100 basis point cut is on the card as the central bank end their 2-day meeting today. This comes after growth has slowed down significantly, causing a looming recession.

Earlier this month it was also decided that the policy meeting would take place every month for the rest of the year.

According to Reuters, 24 out of 28 polled economist predicted a full percentage point cut in the repo rate to 9.5%, while 3 forecast a 150 point drop. One of the economists predicts a 50 point cut to kick off smaller cuts spread through the year.

December 2008 saw a 50 basis point cut and last month the committee decided on a 100 basis point cut.

The rate cut would be based on hard hit exports on resources and vehicles and a sharp decline in manufacturing. Output fell by 11.1% year on year in January and mining output and tight household budget have put South Africa on course for its first recession in 17 years.

Absa Capital says that it is likely that the Reserve Bank will cut the interest rate with 150 basis points.

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