03.29.2001
Central Bank set to cut interest rates by 25bp this afternoon

• The Central Bank (CBC) will hold its quarterly board meeting this afternoon. In an environment of controlled inflation and record high unemployment, together with contracting global and domestic demand, we expect the CBC to cut its rediscount rate by 25 basis points.

• With YtD CPI growth running at 0.7% and inflationary pressure from wages on the wane amid record high unemployment, stimulating domestic demand is now the CBC's top priority. The CBC has made a series of rate reductions since December 2000, bringing its rediscount rate down to 4.25% in March from 4.75% in November 2000.

• We predict the CBC will lower its rediscount rate by 50 basis points in 1H01, inclusive of today's anticipated 25 basis point cut. Any positive impact will not filter through to the economy for six months and could be forestalled by slowing demand in the US.

IrmakSurenkok@Primasia.com +886-[0]2-2547-8873