Reserve Bank of South Africa Begins Easing Policy

December 11, 2008

The South African repo rate was cut by 50 basis points to 11.5%. While many other central banks including three earlier today had implemented several recent interest rate reductions, this was the first of a credit loosening cycle for South Africa, where CPIX and PPI inflation still surpass 10%. But an explanatory statement released by the central bank observed an improved outlook for inflation and projected CPI inflation at 6.2% on average next year versus 12.4% in October and 13.6% when officials last met in August. By end-2010, inflation is expected to have subsided to 5.3%, but the forecast is associated with some residual upside price risks. The global slowdown has been faster than bank officials anticipated. South African GDP expanded only 0.2% at a seasonally adjusted annual rate last quarter. The next meeting and rate announcement in South Africa is scheduled for February 11-12.


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