Another Rate Cut On The Cards?

The information in this article is courtesy of Fin24 (Market expects one more cut – 9 July 2009)

Speculation about another rate cut is doing the rounds, according to a senior dealer in the money market. The dealer stated that although there is pressure at the short end due to issuance, many in the market do expect one more 50 basis point cut in September while some are even expecting two more cuts.

Apart from the speculation regarding another rate cut, the money market also finds itself guessing if Governor Tito Mboweni will renew his contact come the August 7, 2009.

Meanwhile an article on iAfrica reported on the effects of the recent interest rate cuts on cash investors and debt owners.

According to the article, those who have invested in money market instruments such as fixed deposits, money market accounts or even in a fund with high exposure to cash, the recent rate cuts would have had an incredibly negative impact. This is especially worrying for investors who make a living out of the market and are therefore at the mercy of these declining yields. There is also the risk of these yields not keeping pace with inflation and ultimately resulting in the loss of buying power – meaning you will “save yourself poor”.

If you are, however a debt owner, the last 6 months has been a welcome relieve and has presented the perfect opportunity for some to claw their way out of debt.

This only means that all eyes will be on the monetary committee on the August 13, when the decision on another rate cut will be made.