Interest rates hit rockbottom

INTEREST RATES are at rock bottom, according to the Standard Bank economics division’s latest market forecast.
“We have reached the end of the road,” the report said.
“Barely a month ago, when inflation data was released, we argued that the numbers justified further monetary easing. The inflation outlook has not deteriorated, but the rand’s recent behaviour, coupled with a few other secondary concerns has heightened uncertainty.
“The rand’s recent volatility has not only unnerved the markets, but probably also the Reserve Bank.”
Colen Garrow, writing in ABSA Bank’s MoneyMax, agreed.
“Predicting the near-term direction of the rand is challenging,” he said.
A study of the variables affecting the currency indicates that it may remain volatile over the forthcoming delivery of the budget on February 18, the Reserve Bank’s monetary policy committee (MPC) meeting on February 25-26, as well as pending elections - the date for which has yet to be announced by the Independent Electoral Commission.
“A volatile currency environment is not conducive to further easing in interest rates when the Reserve Bank’s MPC meets next month,” said Garrow.
“Apart from the threat to the inflation target which may arise from more expensive food (read drought) and fuel prices (read higher $-based oil prices) this year, there is a growing perception that the Reserve Bank does not want to be seen easing rates ahead of an election for concern that this may compromise its autonomy.”