Interest Rates were kept unchanged yesterday (22 July 2010), leaving the prime interest rate at 10%. The South African Reserve Bank has put the breaks on rate cutting in recent months. The last interest rate cut took place in March this year.
In total interest rates have been slashed by 5.5% since December 2008.
But, another drop in rate has not been ruled out. Some economists are speculating that we may see a small drop in the prime lending rate before the end of this year.
To date the Reserve Bank Governor. Gill Marcus, has been very cautious about the future of the inflation rate. Inflation is currently below 5% and well within the targeted band of 3% – 6%.
But, excessive wage demands and higher electricity costs are expected to put upward pressure on the inflation rate.
And, many believe that by resisting a small rate cut now the Governor has managed to delay the need to hike interest rates. The first rate hike is now only excepted by mid-2011.