Brace yourselves for another hike
July 13, 2007
By Evan Pickworth
Johannesburg - The introduction of stricter lending laws in June should help reduce demand for consumer credit but will not likely prevent the South African Reserve Bank from raising rates by 50 basis points after its monetary policy meeting in mid-August, Moody's Economy.com said on Friday.
Moody's said inflationary pressures remained and this meant the bank would likely maintain its monetary tightening stance.
"Despite the recent backing-down of several labour unions from double-digit wage demands, the salaries under negotiation generally remain well above inflation, while higher oil prices are also adding to inflationary concerns," they said.
They also pointed out that tighter monetary policy, plus slipping consumer confidence, was likely to dampen spending enthusiasm.
"In turn, household spending could take a knock. Consumer confidence figures out this week highlight the possibility of slower spending, with the headline gauge dropping to 21 in the first quarter of the year from 23 in the previous three months.
"A deterioration in the assessment of personal finances was the key drag. Although the confidence sub-measure for low-wage earners (less than R800 per month) hit its highest level in a decade, the survey was conducted before last month's interest rate hike," Moody's said. - I-Net Bridge
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