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Friday Jan 20, 2012

'Repo rate to stay unchanged till 2013'

Cadiz Asset Management economist Adenaan Hardien maintains his view that the repo rate will remain unchanged until the first half of 2013.

He said on Thursday that the Monetary Policy Committee's decision on Thursday to leave the repo rate unchanged at 5.5% was generally expected.

"We have argued that the repo rate will likely remain unchanged until the first half of 2013. We remain comfortable with this view," he said.

"The alternative risk view is one that sees the MPC hiking rates towards the end of 2012," he added.

Hardien noted that the MPC statement had a hawkish tone on inflation, as one would expect given the Reserve Bank's inflation outlook. Yet, the bank clearly remains concerned about weak growth prospects.

"According to today's MPC statement, the outlook for growth and inflation has deteriorated since the previous meeting. The Bank now sees inflation breaching the upper end of the inflation target for a more extended period than previously anticipated. Yet, it also expects growth to be weaker than was previously anticipated. And, it continues to see inflation driven by supply-side factors, with core inflation subdued."

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