South African Reserve Bank (SARB) governor Gill Marcus announced yesterday that the repo rate will remain at 5.75%, citing the anaemic state of the domestic economy. The decision was taken following its second-last monetary policy committee (MPC) meeting for the year.
h3. Decision on Rates
“The MPC has decided that the repurchase rate will remain unchanged at 5.75% per annum,” she said. It was based on the improved inflation outlook, the stable inflation expectations and the downside risks to the weak growth outlook. However, Marcus said the MPC is also mindful of the weak economy and increasing unemployment rates. “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,” she said.
Marcus said domestic economic outlook has deteriorated since the last MPC meeting. The Reserve Bank revised down the GDP forecast to 1.5% from 1.7% previously. It also revised inflation forecasts to average at 6.2% in 2014 from 6.3% previously. She said emerging markets generally are facing headwinds. Marcus added that future decisions are highly data dependent.
The interest rates has increased by a cumulative 75 basis points this year so far. SARB lifted the rate in January by 50 basis points and in July by 25 basis points.The repurchase rate is the interest rate at which the SARB lends money to commercial banks.Economists expressed mixed views on what decision the MPC would take, following better-than-expected retail sales figures and an increase in consumer inflation.
h3. Decision by Governor
Following the announcement of the Monetary Policy Committee’s (MPC) rate decision, SARB governor Gill Marcus stated further that she will stand down on 8 November 2014 when her five-year term ends.
Marcus, who guided South Africa through a turbulent five years since the global financial crisis, told a news conference at the end of a MPC meeting, that she has notified President Jacob Zuma about her decision. “This is my last MPC. I have advised the president some time ago that I would not be available for renewal,” she said, according to Reuters. “I think the bank has an outstanding team of leadership, both in the executive, monetary policy, leadership, management of the bank.
“Therefore, I’m quite comfortable saying that I’m very happy that whoever the president chooses to succeed as the next governor will continue with the strength of this institution and do an excellent job.”
Well, let’s hope Jacob Zuma has run out of incompetent relatives and friends by now, otherwise the Reserve Bank will surely produce the final nail in the coffin that is currently housing the South African economy!