Tue, 12 Feb 2008
The Bureau for Economic Research (BER) said in their first-quarter 2008 economic prospect report on Tuesday that despite the worsening inflation picture, it expects interest rates to remain unchanged for the rest of 2008.
This view is supported by gathering evidence — highlighted in the January MPC statement — that the consumer is reacting to the 400 basis points worth of interest rate hikes implemented since mid-2006.
“Given that our updated inflation forecast indicates that CPIX is set to average just below six percent in 2009, there seems to be very little room, except if growth slows significantly more than forecast, to cut rates before the end of 2008. We do, however, foresee marginal interest rate cuts (50 to 100bps) in 2009,” said the BER.
“It is important to emphasise that interest rates are not expected to fall back to the low levels (prime rate at 10.5 percent) witnessed in 2005/early 2006,” added the BER.
“For one thing global price pressures are unlikely to be as favourable for local inflation dynamics as was the case during 2003 to 2005,” concluded the analysts.
Source: iAfrica