More and more economists and analysts are beginning to forecast on another interest rate cut for this year.

The repo rate was unexpectedly reduced by 50 basis points in March to reach 6.5 percent after many had estimated that there would be no further rate cuts this year.

The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) usually takes a few factors into consideration when taking a decision on interest rates.

These include inflation and inflation outlook, how the economic growth is progressing and the rand exchange rate.

Factors to consider

Several indicators are also taken into consideration, including business and consumer confidence indices and the purchasing managers index, which gives an indication of activity in the manufacturing sector.

Inflation has been easing over the past few months and the rand has been strengthening, mostly driven by international developments especially China's decision to ease foreign exchange policies. The strength in the local currency is not expected to continue for long.

The fact that unemployment is expected to remain high is another factor to be considered.

The 4.6 percent economic growth rate seen in the first quarter is not expected to be repeated, although the economy is still forecast to have continued expanding in the second quarter of this year.

All these factors will be taken into consideration when the MPC starts it's meeting on the July 21.

"We continue to expect a 50bp cut in interest rates in July, or at the latest September," said Investec Group Economics analyst Annabel Bishop.

Event-driven

"SARB may not cut interest rates again in mid-July. Regarding September or November, it depends on events, especially surprises moving goalposts," said FNB Chief economist Cees Bruggemans.

A money market dealer says there are those in the market that think there is an outside chance of one more cut in rates probably in the third quarter of year.

"With debt to income at 80 percent, little employment, retraction after the world cup and an uncertain consumer revival, the economy is not out of the woods, so I believe there could be one more cut in rates, although this is not the house view," the dealer said.

Reserve Bank Governor Gill Marcus said after the MPC's May meeting that CPI forecasts indicated a slightly improved outlook with lower projected inflation for 2010 and 2011.