The Running Commentary

I hate to say I told you so….

blog-size.jpgAs predicted in my post of 23rd May, the governor of the reserve bank once again increased the repo rate by 50 basis points. I may only be an amateur at this, but all of the analysts had predicted a full point increase.

I think that the Governor only increased by 50 basis points as a result of him needing to shown the intention to target inflation.  The analysts were correct to price in a full point increase given the economic data around. The unions it would appear also have a say. I feel that the Governor and his team face a really tough prospect in the months to come, the majority of the voting population are now beginning to take real strain in terms of the increased rates but the overall need is to keep inflation in check.

My contention is that the reserve bank also knows that the inflationary pressures are somewhat outside of the “ordinary man’s” control but they will continue to feel the need to slow the economy even further.

My belief is that we will see yet a further 50 basis point increase at the next policy meeting, so once again my advice clear your debt before you start to lose the “assets” you have.

Inflationinterest ratesReserve BankSouth AfricanTito

Mike • June 17, 2008

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