Low interest rates look set to stay

The SA Reserve Bank has increased its CPI inflation forecast to a peak of 6.6% in 2Q2012 due mainly to a weaker rand. The prediction is that it will stay above 6% for all of 2012, only re-entering the 3%-6% target in 1Q2013 and ending 2013 near 5.5%. At the same time, it lowered its growth forecast to 2.8% in 2012 and 3.8% in 2013, with a widening of the output gap. The main risk to the economy continues to come from global developments, says FNB chief economist Cees Bruggemans. “Given these conditions, SARB has decided to keep rates unchanged, feeling that monetary tightening at this stage would not be appropriate and favouring a stable interest rate environment under present circumstances. “South Africans will therefore continue for the time being to enjoy interest rates that are at a long-term low, with prime at 9%, benefiting borrowers in all the various credit categories,” he said.