 Could rate rises be on the way back? |
A sharp fall in interest rates since 2002 has sent South Africans racing to the shops, new figures have shown. Retail sales for June were up 10% on the same month of 2003, extending a year-long trend.
Economists believe the spending boom - which has been focused on cars and household goods - is the result of big interest rate cuts and lower taxes.
But the news could tempt the Reserve Bank to start reversing the six cuts it has made since June 2003.
The slashing of rates last year, from 13.5% to 8% by December, was intended to relieve pressure on a rapidly-appreciating rand.
The South African currency rose 30% during 2003, making exports more expensive and hitting profits at the country's big mining firms.
Shock
But last month's cut - reducing rates to 7.5% - came as a surprise after Reserve Bank governor Tito Mboweni had said in June that the rate was set to stay unchanged.
Amid mutterings about political interference, the rand fell more than 5% in just 24 hours.
But the steady increase in retail sales may help fuel inflation, making future rises difficult to resist.
A reverse of the rate cuts will go down badly with South Africa's trade unions, who say that the effects of the strong rand are still damaging employment prospects.
One-Minute World News 
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