Absa not expecting any rate adjustment in 2006

While Absa expects wage increases, consumer demand and a lack of spare production capacity to pose major threats to the inflation outlook and therefore interest rates at the moment it does not expect any rate adjustment in 2006, according to its Monthly Economic Indicator published March 20.

The bank also airs some concern about the combined effect of rising fuel prices, food prices and a further increase in money supply and credit extension, noting that these factors could well tilt the scales in favour of a rate hike.

However, in its final analysis it believes the South African Reserve Bank will “probably be happy to hold out (on interest rate increases) until these risks have dissipated.”
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