Interest Rate Cut At Hand

The information in this article is courtesy of iAfrica ( GDP data fuels rate cut – 25 February 2009)

According to Rian Le Roux, economist at Old Mutual Investment Group South Africa (OMIGSA), there is a good chance that South Africa’s Reserve Bank will lower the interest rates yet again. This decision could be made by as early as the end of this week.

This comes after the economy decline for the first time in a decade in the last quarter of 2008, with the GDP shrinking by 1.8 percent quarter-on-quarter on a seasonally adjusted and annualised basis, from 0.2 percent growth in the third quarter.

The data confirm that the economy had been hard hit by the combination of the rise interest rates during August 2006 not to mention the recent global economic slump, said Le Roux. He added that investors should avoid over-reacting to this news and he further advised that they should focus on the long-term picture because things could’ve been worse as they had expected an even lower decline in GDP of –2.0%.

While the global economic slowdown will continue to negatively affect South African exporters, it will also give local companies a reason to cancel any capital expansion plans.

Le Roux is however positive that consumers should experience some relief in the months to come.


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