A rate chance

The central bank's inflation forecasts may soon come to reflect lower growth and inflation risks, and this may prompt it to change its mind enough to lower interest rates in December, which is earlier than generally expected or discounted.

This is the view of chief economist from FNB, Dr Cees Bruggemans, who points out that South Africa's economy won't remain immune.

Global car sales are plunging

He notes that global car sales are plunging, commercial truck sales collapsing, shipping becalmed, steel production heading south, industrial output contracting, US unemployment angrily rising to 6.5 percent, deteriorating growth outlooks in America, England, Europe and Japan, with emerging export prospects diminishing.

"As our policymakers participate this month at G20 and Basel meetings, they will hear about global progress with addressing financial malfunctioning.

"But they will also observe deepening gloom about global recession and frantic efforts to stem it," he says.

"Our car and steel output are now also plunging 30 percent. Our property prices are falling. Our credit growth should turn single digit in 1H 2009. Motor trade, real estate, building trades, banking, much of retail and mining, and parts of manufacturing. They are all under water or getting there rapidly, contributing to the lowering of inflation," says Bruggemans.

Keynes was famous for his little asides. "When the facts change, I change my mind. What, sir, do you?"

Less anxiety about oil, food or rand

"The SARB's inflation forecast may soon come to reflect these changing risks. More economic downside and less anxiety about oil, food or even rand, if capital flows are seen as holding up reasonably well, our rate differentials widening further as global rates plunge.

"That could bolster expectations of plunging inflation actually materialising next year," concludes Bruggemans.

SA's next interest rate decision will be made known on 11 December after rates were kept on hold on October 9 at 12 percent in the face of coordinated cuts elsewhere in the world.

I-Net Bridge

Article by: Evan Pickworth - www.businessday.co.za