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More factors point to another interest rate cut in November 2010

Category Market

More factors are pointing to an interest rate cut at the 18-19 November meeting of the SA Reserve Bank's (SARB) Monetary Policy Committee (MPC), Absa Capital Research economists said Tuesday. These include among others, the third quarter inflation coming in lower than the bank had anticipated, a continuing decline of inflation expectations, weak economic recovery and rand strength. Inflation reached 3.4% in the third quarter of 2010. The economists said that this print lowers the starting point for the inflation trajectory, adding that a further downside surprise was likely in the fourth quarter. This despite a four cents a litre and 20 cents a litre increase in the price of petrol in October and November. The bank has already reduced the repo rate, currently at six percent, by 600 basis points since December 2008. "We think the risks for further rate cuts in the first few months of 2011 are balances as the SA Reserve Bank's decisions will be considerably data-dependent," the economists concluded.- I-NetBridge

Author: I-NetBridge

Submitted 11 Nov 10 / Views 5637