Peter Brooke, head of macro strategy investments at Old Mutual Investment Group (OMIGSA), says that it would be a policy error if the central bank hiked interest rates at the end of the month.

"If you look at what’s happening in the economy, it will add an additional burden and slow down momentum, which is a problem," he explains.

OMIGSA does not, however, expect any rate cuts in 2008.

Brooke says a risk remains that the South African Reserve Bank may raise rates next week, but does not expect this to be the case.

Brooke points out that there is clear evidence the 400 basis points of hikes in the current tightening cycle are starting to work, with vehicle sales down 18% year-on-year (y/y), building plans down 9.4% y/y and retail sales only up 0.2% y/y.

OMIGSA sees CPIX inflation averaging 6.3% in 2008 from 6.5% in 2007 and ending 2008 as low as 5.0%.