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We confess...

29 September 2004 Angelo Coppola

We have to confess, according to the inflation data released today and yesterday another interest rate cut may be accommodated, says Nico Kelder, economist at the Efficient Group.

Inflationary pressures in the economy are clearly less than thought and our criticisms towards the monetary authorities for cutting rates at the previous MPC meeting was clearly wrong, based on the eventual developments on the inflationary front.

We maintain our view that the cut came as a surprise and the market does not like surprises but technically the cut was correct albeit somewhat daring.

Now it appears as if inflationary pressures are even less and another cut may be accommodated.

As usual we have to warn that oil, the exchange rate and a rising international interest rate cycle could force the SARB to reverse recent interest rate cuts but it seems as if it’s a risk worth taking.

So to the SARB, we were wrong, you were right but we had the guts to say so. And while we are on the topic; these words do not seem like those of arrogant economists.

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