Repo rate likely to remain unchanged

Thursday, October 22, 2009

Pretoria - Economist have predicted that the repo rate will remain unchanged when the Reserve Bank's Monetary Policy Committee (MPC) makes its decision later today.

Reserve Bank Governor Tito Mboweni, who is to be replaced by Gill Marcus next month, will announce the MPC's decision at 3pm.

Last month's meeting decided to keep the repo rate at 7 percent.

"We are not expecting a change given the risks such as low credit growth," Chris Hart, Senior Economist at Investment Solutions, told BuaNews.

Standard Bank in its predictions of the MPC's deliberations which began on Wednesday also said that it believed the repo rate would remain unchanged.

"On balance, it appears that data announcements over the last month have surprised on the downside, but not enough to sway the MPC," said the bank, adding that recent weaker manufacturing production and retail sales data were disappointing and substantially below expectations.

"It does not appear that either of these sectors will show a meaningful improvement before the first half of 2010. Furthermore, consumer and business confidence levels are both relatively fragile and unlikely to support the economy over the short term."

Nedbank, however, has predicted an announcement of a 50 basis point cut, according to the bank's economist Carmen Altenkirch.

"Although we've seen a modest upturn in the economy, conditions are still weak as seen in the retail trade figures," said Altenkirch.