Pretoria | Monday
HOPES for an interest rate cut received a boost on Monday with a 3,5% point drop in the money supply.
Should South Africans receive a one percent rate cut it will give them the lowest interest rate since 1986 — just in time for Christmas.
The SA Reserve Bank (SARB) reported that the money supply was 14,47% in September, compared to 17,92% the previous month.
This was better than market expectations, an economist said.
The SARB said private sector credit extension was 9,49%, compared to 10,38%.
Tradek economist Mike Schussler said the figures were very positive and could lead to an interest rate cut by the SARB at its monthly monetary policy meeting early next month.
”Domestic factors and the world environment favour a rate cut of at least half a percent — if not a full percent,” he said.
”Because of the global economic slowdown everybody has been cutting rates. In the US they are the lowest in 40 years and in Europe the lowest in 10. Another rate cut is expected there shortly.”
In South Africa, he said, core producer price index inflation was at its lowest level since August 2000 and the SARB’s consumer price index targets have now been met two months in a row.
Schussler expected commercial banks to follow suit.
The SARB’s repo rate is presently at 10% and the prime lending rate stands at 13%. – Sapa