Reserve Bank of South Africa Eases 100 Basis Points

February 5, 2009

The repurchase rate was cut to 10.5% from 11.5% in follow-up to December’s initial 50-bp rate reduction.  The size of the cut matches market expectations. The Monetary Policy Committee will next meet on April 15-16 and is likely to ease then, too.  The 12% cyclical peak in rates was in place from mid-June to mid-December of last year and corresponded with a period of above-target inflation.

Since cresting, inflation has decelerated by 3.3 percentage points to 10.3%. A statement released by the Reserve Bank projects a continuing decline of inflation to an in-target 5.2% by 3Q09.  More importantly, projected 5.5% inflation at the end of the forecast period also would be below the target ceiling.  Rand depreciation poses the greatest upside threat to inflation.

Copyright 2009 Larry Greenberg. All rights reserved.  No secondary distribution without express permission.

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