Interest rate decision on webcast

The Monetary Policy Committee of the Reserve Bank has been meeting Wednesday the 12th of August and today the Thursday the 13th. Including this one there are only three more meetings of the MPC before Tito Mboweni moves on. As always there is speculation regarding what the decision of the MPC will be. Most commentators seem to expect no cut, although there have been some rather loud calls for cuts and large ones at that. The decision will be live on webcast at 3 pm. So what are the chances?

• Most economists say no cut
• Twittersphere says no
• Mboweni may want a swan song

So although the prospects don't seem very good and even though major decisions like this should be based on hard facts often sentiments seeps into the decision, after all the invisible hand is often the sentiment and emotion of the market rather than some abstract mechanism. It is the feeling and intuitions of actual people in the market which sways their economic decisions. The data may be looking slightly better on the inflation front, but other figures show that the economy is still in decline so there are arguments both for and against a cut.

Tito Mboweni is on his way out and may want to get a bit of feelgood back from the market before he goes. Then again he is on record as saying the Governor of the Reserve bank is not a position to be based on popularity. However his past form shows that he does like to spring the odd surprise. Justmoney asked the Twittersphere what they thought and most said no change, and that The Guv will wait for the effects of previous cuts to filter through. There was even one call for an increase given that there may be further turmoil to come in international markets which could still wash over us here. Watch it live on webcast at 3 pm.

Last blast from The Guv

Tito Mboweni after a long and illustrious career as The Guv of the Reserve Bank is to retire. His tenure was dominated by the policy of inflation targeting. Tito is moving on to be replaced by Gill Marcus. This may or may not herald a policy change, but The Guv is giving it his best in his last few moments at the helm. He recently addressed University of Johannesburg students and these are some of the points that he made:

• Bank should remain independent
• Scathing of government management
• Bank should protect the currency

These are pretty normal ideas in the particular economic framework that most of the world exists in. The fact that the Bank is private however does allow control of the money in the country to be outside of government control. Money control can often have a larger effect than who is actually in government. The government set the policy of inflation targeting for which Mboweni came in for a lot of flak.

While the policy of inflation targeting can be seen to have been successful it still has many detractors and it will be interesting to see if the Reserve bank takes a new stance under the new Guv. The South African economy has so far weathered the global crisis better than many others and we are expecting a boost with the World Cup next year. Regardless of any new policy now is always a good time to plan your budget and make sure that you are not surprised by any shocks that may come in the future.

What should Tito tell them?

The Governor of the Reserve Bank, Tito Mboweni, has recently made comments in public about the gap between the Repo rate and the Prime rate. The banks had immediately responded by calling for a meeting with The Guv. This is now going to happen, on Thursday 21st May 2009, The Guv and the banks will meet. For dinner. The comments about the rate spread were made by Mboweni at the last Monetary Policy Review. So what should Tito tell them?

• I don't pay enough bank charges!
• Please can you increase the interest rate?
• I don't want to compare banks

Well you could tell Tito to tell the banks that or you could tell him what you really think that he should be telling the banks. The banks seem to be of the opinion that the 3.5 percent spread was expected of them and are now pleading ignorance to the cause of these comments made by Mboweni. This is why The Guv is meeting with them. So they can clarify the situation. Well here is a chance for you to clarify your situation. Clicking on this link will put you in touch with Ms Mpho Mtimkulu She is the personal assistant to Tito Mboweni at the Reserve Bank. Let her know what you think Tito should be saying.

A more competitive position on the gap between Repo and Prime would go a long way into opening up the banking market here, whereby there would be real differences charged by the banks and you would be able to make a more meaningful comparison between them. If you saw that a bank was offering a better rate you would be tempted to change banks. The banking market in South Africa is very static and customers do not easily or readily change banks. So although it may seem that a bit more competition between the banks would be a good thing, would consumers actually vote with their feet and move over to another bank if it was offering a better deal?