The prime lending rate is expected to end 2009 at 11 percent, Nedbank Group's economic unit said on Friday. The prime rate presently stands at 15 percent. Nedbank said credit figures released earlier on Friday — along with economic data released earlier this week — had boosted the case for a more aggressive interest rate cut at next week's Monetary Policy Committee meeting. "Recent releases seem to confirm that the manufacturing, mining and retail sectors are all in recession, while inflationary pressures at both the producer and consumer level are receding fast," it said.

Furthermore, the global economy's woes had intensified, which would add to deflationary pressures and the possibility of a more protracted slowdown in South Africa. "Given the lag between loosening monetary policy and the impact on the real economy, the SA Reserve Bank will probably opt to act more aggressively in the early part of the year, cutting rates by 100-basis-points in both February and April before reverting to 50-basis-point cuts in later meetings," Nedbank said.

Earlier the SA Reserve Bank released data showing that private sector credit extension — or credit growth — eased for a second consecutive month to 14.04 percent annually in December from 15.30 percent the previous month — an indication that the general level of credit extended to the private sector was responding to the elevated interest rate environment.

Sapa