The Running Commentary

Interest rates up or not????

CPIX trackWith economists currently divided about whether the next MPC (Monetary Policy Meeting) will increase interest rates, each delivering valid reasons for their argument. It appears to me that the governor must follow the policy that he set in place when he started this round of increases.

This, I am afraid to say, means that he will be forced to increase interest rates by a further 50 basis points. This despite the now infamous Investec report, which he has said will carry no weight in terms of the MPC , “as far as I know there is only one official statistician” – these words may spell disaster for us the consumer.

The Investec report is not the only issue, more concerning are the double digit wage negotiations and the Eskom effect which are still to be truly felt.

I would then add that we will see the interest rates come off from the middle of 2009 as we see the impact of this and past hikes really cooling the economic mood. Not that it has not already cooled, just that it takes time for the true effects to take hold.

We will certainly all find out by the end of the 14th of this month……In the meantime, lets stick to keeping the cloth well trimmed to meet only those needs that are a necessity and not a nice to have.

Inflationinterest ratesInvestecMPC

Mike • August 4, 2008

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