Stanlib's Weekly Focus 13 October 2008

EXECUTIVE SUMMARY OF STANLIB’s WEEKLY FOCUS

ECONOMIC WEEKLY REVIEW

· Unprecedented moves by central banks around the world last week dominated the headlines. In a unified attempt to limit the ongoing crisis in global financial markets, and break the cycle of panic selling across the board; central banks undertook a co-ordinated rate cut. The bold move initially provided a small bounce for equities, but later added fuel to the increasing concerns over the state of the economy.

· The G7 (Japan, Canada, Britain, Germany, France, Italy and the USA) meeting held last Friday did little to lift the spirits of investors; although guidelines were agreed upon to jointly repair the broken financial system, no concrete steps were confirmed.

· Back home, the South African MPC (Monetary Policy Committee) opted to remain firm in its stance against inflation by keeping rates on hold on Thursday, 9 October 2008. This leaves the Repo rate at 12% and Prime at 15.5%.

· Although the outlook for inflation has moderately improved since the last meeting in August, due to falling oil and food prices; global financial turmoil accompanied by heightened risk aversion has weakened the Rand significantly. The SARB still expects inflation to be back within the target range in Q2 2010, with inflation expected to average 6.9% in 2009 and 5.9% in 2010.

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