Marcus expected to leave repo rate unchanged

Monday, January 25, 2010

Pretoria - The Reserve Bank's Monetary Policy Committee (MPC) will today have its first meeting of the year with economists predicting that the repo rate will remain unchanged at 7 percent.

Reserve Bank Governor Gill Marcus, who will be chairing the meeting for the second time since her appointment last year, will announce the MPC's decision on Tuesday at 3pm.

Most economists and bankers said the repo rate will remain unchanged.

Standard Bank said though the country was technically out of the recession, the economy remains vulnerable with households not keen on accumulating new debt as well as increased unemployment still posing problems.

The bank said these concerns raise the prospects for a cut in the repo rate. However, further monetary policy relaxation will not translate into employment growth or stimulate private sector activity.

"While the over-indebted will benefit from more affordable debt repayments, retail sales will not necessarily revive. The chief reason is that job shedding created far more destruction in the retail sector and affected a broader share of the economy."

Nedbank economist Carmen Altenkirch said: "We are expecting them to keep it unchanged at this meeting and for the rest of the year with a hike expected in early 2011."

The central bank has cut the repo rate by 500 basis points since December 2008.

Although there has been a recovery in the supply side of the economy like manufacturing, inflation is likely not to come