Reserve Bank moves up rates meeting

South Africa’s central bank will meet next week on interest rates, more than three weeks ahead of schedule, cementing the case for an early rate cut.

The bank said in a statement on its website it had changed meeting dates for the rest of 2009, with the monetary policy committee (MPC) meeting every month, except for July, without giving reasons for the change.

The MPC previously met every two months.

Reserve Bank Governor Tito Mboweni raised the possibility of calling a special policy meeting after cutting the repo rate by 100 basis points to 10,5% in February, saying the decision depended on economic data.

Since then, figures have shown the economy contracted by 1,8% in the fourth quarter of 2008, the first fall in a decade, and manufacturing output and exports have plunged, stung by the global downturn.

Analysts say Africa’s biggest economy is on course for its first recession in 17 years.

Wednesday’s announcement also follows a meeting of the Group of 20 finance ministers and central bank governors over the weekend that urged fiscal and monetary policy measures to contain the global economic crisis.

Analysts said the meeting would likely cut the repo rate aggressively.

“That’s a clear indication that some decision is going to be taken. My money would be on a one percent cut in rates,” Citadel economist Dave Mohr said.

Government bonds firmed after the announcement, with the yield, which moves inversely to the price, on the 2015 bond falling to 7,835% at 11:09 GMT from 7,96% before. The rand strengthened to 9,8845 from 9,93 against the dollar.

The seven-member policy committee first started unwinding the five percentage points of rate hikes between June 2006 and June 2008 in December, with a 50 basis point move.

Economists predict at least another 300 basis points in cuts this year.

Official data earlier in the day showed retail sales grew for the first time in nine months in January, although analysts warned the recovery may be short-lived as jobs are cut and economic growth wanes.

Statistics South Africa said sales rose by 1,7% compared to the same month last year compared to a contraction of 0,2% year-on-year in December.

But the retail sector is, so far, the only one showing signs of recovery.

Manufacturing output plunged 11,1% year-on-year in January, while exports collapsed 25% during the same months.
New vehicle sales fell 36,3% in February, the biggest fall in more than two decades.

“A rate cut is overdue,” said Brait economist Colen Garrow. “The actions [policy decisions] are going to be on what we need to do to pull the economy onto the path of recovery,” he said.—Reuters

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