/ 29 May 1997

Credit figures suggest rate cut

THURSDAY, 10.30AM

LATEST Reserve Bank credit figures suggest a rate cut late this year, but analysts once again had to contend with mixed signals from the Bank’s statistics.

Private sector credit extension increased 16,95% in the year to April, compared to 15,95% in March, somewhat higher than economists had predicted. Month-on-month private sector credit was up 1%, slightly below the previous year, but will have to drop below to achieve an annual growth rate lower than 14%.

Reading of the figures was confused by money supply growth, which fell in April to 15,44% from 16,46% in March. Analysts suggested the Bank is relying too heavily on misleading data and the time for an interest rate cut should be before inflation moves. However, consensus was that the Bank is only likely to cut rates once this year, in the fourth quarter.