05
Feb
2009
MONETARY POLICY COMMITTEE (MPC) INTEREST RATE DECISION FEB 09

Pointing me in a crooked line...The Monetary Policy Committee (MPC) decision on the interest rate will be known soon. (Update - The MPC have decided to cut interest rates as expected)

Tito Mboweni, Reserve bank president moved the date for the Monetary Policy Committee (MPC) meeting a week earlier to February 4th and 5th. It was moved a week earlier as it coincided with the release of the national budget a week later.

Amid the current global economic crisis the MPC will face a tough decision on the interest rate. In Europe, US and UK economies we have seen interest rates plummeting over the last couple of months with the UK sporting their lowest Base Rate in history of 1.5%.

The local sentiment was recently strengthened with inflation and credit data looking a lot better than usual. Based on this, it is an almost certainty that the MPC will cut rates. It is widely accepted that we're in for a 0.5% cut at every meeting in the next year, but some analysts suggest a slightly more aggressive approach by cutting interest rates by a full 1% this time around.

As oil prices dropped by 60% from its 2008 record highs along with the technical change in the way our inflation is calculated, could see South Africa's inflation rate very quickly move into the 3-6% bracket where Tito wants it. If this is the case, we will definitely see steep interest rate cuts throughout the year.

The Myroof guess it that the MPC cuts rates by 1% (100 basis points) Lets hold our breath till this afternoon for the formal rate decision.

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