OWN CORRESPONDENT, Johannesburg | Wednesday 10.30am.
ITCHINESS for a rates cut from Reserve Bank governor Chris Stals is beginning to increase, now that liquidity in the money market has improved and the rand gained in strength.
The repo rate has now been stuck at 21,855% since the beginning of September, due to the Bank’s policy of under-providing commercial banks’ daily liquidity requirements by around R100-million. The banks’ daily cash requirements, however, have dropped to around R5,6-billion, their lowest level since before the crisis in the money markets that saw the rand slide so dramatically in May and June.
Adding to the potentially reassuring signals for the Reserve Bank is the increasing tendency of major industrialised countries to ease monetary policy or interest rates.
But it is suspected that the cautious Reserve Bank is waiting to see whether Japan comes up with a final package for bailing out its embattled banking system, which would restore stability to Asia’s emerging markets. Stals certainly has an eye on Brazil, which is also trying to work out its own problems at the moment.
Should these two crucial markets stabilise within the next few weeks, there is a possibility of an effective rates cut from the Reserve Bank. However, most economists are beginning to say a rates cut remains unlikely before the end of the year.