Demand for credit from South Africa’s private sector slowed slightly in the year to March, data showed on Friday, easing pressure on the central bank to hike interest rates, analysts said.
Private sector credit extension (PSCE) rose by an annual rate of 24,18%, from a revised 26,18% in February, the Reserve Bank said. A Reuters poll had forecast that credit, which is driving a consumer spending boom, would rise 24,76%.
“The numbers are not bad … I probably think the asset backed components are starting to respond to the high interest rates,” said Colen Garrow, economist at Brait.
The Reserve Bank left rates unchanged at its last meeting in April, although it said inflation would creep up to 5,9%, just in sight of the upper band of the targeted three to six percent.
“Overall it alleviates pressure on the Reserve Bank to hike rates. My feeling is we are still going to get a rate cut in the first quarter in next year, but for now and the rest of the year I think we’ll only see sideways movement,” Garrow added.
The central bank said the high credit demand and household spending were not immediately inflationary, although it warned that bank lending remained “uncomfortably high”.
Credit-driven spending has pushed household debt to a record 73,25% of disposable income in Africa’s largest economy.
During March, the broadly defined M3 measure of money supply grew by 20,02% year-on-year, slightly below forecasts, after increasing by 23% in February.
Annual growth in M3 — which often points to inflation pressures building in the economy — had been forecast to show an annual growth rate of 20,3% during the month.
Government bonds were little changed, with the yield on the benchmark R157 due in 2015 unchanged at 7,605%. The rand was also unmoved by the data at 6,9750 to the dollar.
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