Reserve Bank seen holding rates steady

The South African Reserve Bank (SARB) is likely to keep interest rates steady next week.

Twenty-three of 26 economists polled by Reuters this week see the SARB leaving the repo rate at 7%, with three holding out for a 50-basis-points cut, which would be the first since August last year.

But the door is not closed on more monetary policy easing, with another three analysts predicting a half-percentage point drop during the first half of the year, particularly given the still-weak state of household finances.

Consumers are suffering under relatively high debt and the almost one million job losses suffered during last year’s recession have heaped pressure on the demand side of the economy, threatening to slow recovery from a global downturn.

The vast majority of economists forecast the rate cutting cycle, which saw the repo fall five percentage points between December 2008 and August, to be over. Rates should stay on hold for some time, rising again towards the end of 2010 or in 2011.

Fifteen economists see the repo rate at its current level or at 6,5%—a near three-decade low—at the end of 2010.

Five, though, are expecting the bank rate to end the year a percentage point higher at 8%.—Reuters