Rates Cut, What Happens Next?

BMI View: The 50bps interest rate cut enacted by the South African Reserve Bank on July 19 signals that the monetary policy committee is more dovish than it was previously thought to be. Although there are tangible risks of a further 50bps cut in September, we think it is more likely that rates will be kept on hold. The central bank will want to save its ammunition in case there is an escalation in the eurozone crisis, and it will also need to take into account inflationary pressures stemming from the recent surge in food and fuel prices.

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