CONSUMER INTEREST RATE CUT, A BOOST FOR INDEBTED SOUTH AFRICANS

Cape town - With Moody's announcement last Friday night that saw South Africa escaping a "third junk" financial experts are confident South African Reserve Bank (SARB) Monetary Policy Committee(MPC) will most likely reduce the repo rate by 25 basis points on Wednesday.

According to Nedbank's Corporate and Investment Banking (CIB) after an analysis of its latest Interest Rate Barometer, on a weighted basis the barometer implies a split probability of a 47% chance of a hold and a 47% chance of a cut at this week's MPC's meeting. "Based on our analysis, we are of the opinion that the repo rate will be reduce by 25 basis points this week. However before Friday's rating action we thought a cut was more likely in May rather than at this week's meeting" said Nedbank.

John Loss, household and property sector strategist at FNB indicated that the First Rand Bank also experts a 25 basis points interest cut on the repo rate on Wednesday. He said from an "inflationary pressures" point of view, such a cut would appear completely justified in the light of the latest Consumer Price Index (CPI) inflation rate for February being at 4% - therefore in the lower half of SARB's 3% to 6% target range.

If the MPC cuts the repo rate by 25 basis points, this would lower the rate at which banks borrow money from the SARB 6.5% and prime lending to consumers to 10%.