Beating the credit growth path to door

The central bank last Friday slashed the benchmark interest rate by another 50 basis points further pulling down lending rates that were already sitting at record low levels. The sole and well-intended aim of the rate cut is to try and make lending cheaper, particularly to those who want to use the funds for productive purposes. With inflation similarly sitting at record low levels, the BoB could afford to loosen its monetary policy without fears of demand push factors kicking in again from the extra cash that would have been pumped into the economy.

Additionally, the low wage and employment growth rates could be causing weak household consumption and thus resulting in lower demand-pull inflation pressures through to 2017.