The South African Reserve Bank kept the repo rate steady at 6.75% on Thursday, but it was close. Three members of the MPC were in favour of no change, while two voted for a cut of 25 basis points. And the next move will almost certainly be south, if the prevailing forecasts on the inflation and growth fronts hold.
The central bank also revised its economic growth forecasts downward, which was expected after a spate of poor mining, manufacturing and retail data — partly the result of load-shedding — pointed to a contraction in Q1, which the SARB said is now expected. That data will come out in early June. The SARB revised its growth forecast for the year to 1.0% from its March forecast of 1.3%, which looked overly optimistic even then.
The SARB was also at pains to point out that monetary policy alone will not address the significant structural issues and challenges that are constraining growth in Africa’s most developed economy. Don’t expect a round of “quantitative easing”, which in emerging markets such as South Africa’s is usually referred to as printing money.The committee remains of the view that current challenges facing the economy are primarily structural in nature and cannot be resolved by monetary policy alone.
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