South African Reserve Bank
September 18, 2014
The statement released by Governor Marcus of the South African Reserve Bank outlines numerous economic imbalances. CPI inflation of 6.4% is hovering near the target ceiling, yet GDP growth, hurt by crippling labor strikes, is now expected to be just 1.5% this year. The current account deficit last quarter surpassed 6.2%, and the budget deficit exceeds 4%. Rand weakness (a 7-month low versus the dollar) threatens to generate inflationary pressure. Household credit demand is very soft. South Africa’s commodity export sector is vulnerable to elevated global geopolitical tension.
Policy has to tow a balancing act. The benchmark central bank interest rate, which had fallen from 12% prior to December 2008 to 7% by August 2009 and 5.0% by July 2012, was lifted this year by 50 basis points in January and by 25 basis points to the current 5.75% at the prior Monetary Policy Committee meeting on July 17.
WE RECOMMEND THE VIDEO: Forex: What is Forex? |Hindi| [Ep. 18]
In this video we discuss about forex trading. Please follow on Telegram: ...
At this point, however, officials are more concerned about the deterioration of growth. Their latest statement concludes,
The MPC is still of the view that interest rates will have to normalise over time. However, given the slightly improved inflation outlook notwithstanding the upside risks, the stable inflation expectations and the downside risks to the weak growth outlook, the MPC has decided that the repurchase rate will remain unchanged at 5,75 per cent per annum. Despite the 75 basis point increase so far this year, monetary policy remains accommodative, and will continue to be supportive of the domestic economy subject to achieving its primary inflation targeting objective. Future decisions will, as always, be highly data dependent.
The last policy announcement scheduled this year will be on November 20.
Copyright 2014, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
This entry was posted on Thursday, September 18th, 2014 at 9:58 am and is filed under Central Bank Watch. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
Comments are closed.
Currency Thoughts has evolved from a blog to a full-functioning website. This new design provides easier access to your favorite features and new capabilities to accept ads. In the future, it will be possible to register to accept emailed updates.