Repo rate seen to stay unchanged

JOHANNESBURG – South Africa’s central bank should keep its repo rate unchanged at 9,0 per cent when its policy committee meets again next month, Moody’s Economy.com said on Friday.

The latest forecast is in sharp contrast to the economic research unit’s stance in December when it anticipated rate hikes in both February and April. Analysts in South Africa are mixed on whether the South African Reserve Bank’s (SARB) upward rates cycle will continue in 2007, following four increases, totalling 200 basis points, since June last year.The key CPIX inflation gauge is still expected to push higher toward the upper end of the bank’s 3-6 per cent target range, although the pace of increase has slowed, and credit growth remains near record levels.But Moody’s Economy.com – the research arm of the Moody’s Group – said global inflationary pressures had eased while domestic manufacturing activity appeared to be slowing on the higher rates, and lower fuel costs would help to tame producer inflation.”Even though the SARB will no doubt keep a close eye on the rapid pace of credit expansion and money supply growth in the opening months of the year, we suspect the SARB may be finished raising rates in the current cycle,” it said in a weekly note.High consumer spending is the main concern for the central bank with retail sales growth still in double digits despite tighter monetary policy and credit growth at 26,77 per cent year-on-year in November, just off the previous month’s record.The central bank would opt “to leave its key repo rate unchanged at nine per cent at the next monetary policy setting meeting in February in response to the rapid retreat in global inflationary pressures in recent months”, Moody’s Economy.com said.The bank’s monetary committee meets every two months with the next rate decision expected on February 15.The research group said in a statement on December 1 that the rate increases in 2007 had failed to curb households’ appetite to spend, “virtually guaranteeing” further rate hikes.Nampa-ReutersAnalysts in South Africa are mixed on whether the South African Reserve Bank’s (SARB) upward rates cycle will continue in 2007, following four increases, totalling 200 basis points, since June last year.The key CPIX inflation gauge is still expected to push higher toward the upper end of the bank’s 3-6 per cent target range, although the pace of increase has slowed, and credit growth remains near record levels.But Moody’s Economy.com – the research arm of the Moody’s Group – said global inflationary pressures had eased while domestic manufacturing activity appeared to be slowing on the higher rates, and lower fuel costs would help to tame producer inflation.”Even though the SARB will no doubt keep a close eye on the rapid pace of credit expansion and money supply growth in the opening months of the year, we suspect the SARB may be finished raising rates in the current cycle,” it said in a weekly note.High consumer spending is the main concern for the central bank with retail sales growth still in double digits despite tighter monetary policy and credit growth at 26,77 per cent year-on-year in November, just off the previous month’s record.The central bank would opt “to leave its key repo rate unchanged at nine per cent at the next monetary policy setting meeting in February in response to the rapid retreat in global inflationary pressures in recent months”, Moody’s Economy.com said.The bank’s monetary committee meets every two months with the next rate decision expected on February 15.The research group said in a statement on December 1 that the rate increases in 2007 had failed to curb households’ appetite to spend, “virtually guaranteeing” further rate hikes.Nampa-Reuters