SARB MPC decision on the repo rate

The [SA] Monetary Policy Committee decided to leave the repo rate unchanged at 6,5 per cent per year.

SARB Monetary policy stance: The assessment of the Monetary Policy Committee is that inflation is likely to remain within the inflation target range over the forecast period, and that the economy is expected to continue on a recovery path. The risks to the inflation forecast are seen to be more evenly balanced than at the previous meeting of the MPC. The main risks to the inflation outlook emanate from administered price developments and from the risks emanating from the global economy. The domestic growth outlook will continue to be affected by the global developments. The MPC will continue to monitor these developments closely.

For these reasons, the MPC deems it appropriate to maintain the current stance of monetary policy. Accordingly the repurchase rate remains unchanged at 6,5 per cent per annum.

Repo rate to stay stable for some time to come

The repo rate -- which is the rate at which the South African Reserve Bank (SARB) lends money to commercial banks -- will stay stable "for some time to come", SARB Governor Gill Marcus said at a conference hosted by the Bureau for Economic Research in Sandton, Johannesburg.

"Of course, this depends on no major developments taking place," Marcus said.

There had been rumours that as a result of poor retail sales data for February, another cut was just around the corner. "I must warn against jumping to conclusions on one month's data," Marcus said.

She said it was important to look at the reasons for the latest repo rate reduction, which had taken place in March.

"Our statement emphasised that despite clear signs that the economy had emerged from the recession, the pace of recovery was still below potential. "We saw the improvement in consumption expenditure in particular as being tenuous."

Source: Mail & Guardian

Welcoming the rate cut and prime 10%

FNB Rex Column, by Cees Bruggermans
 

It isn’t as if the economy now only has tailwinds blowing its recovery along.

The Minister of Finance will be reducing his budget deficit for a number of years in part by slowing growth in government spending. That’s a headwind.

The Rand has gained ground over the past year and the global forces driving it may not be finished. That’s a headwind, too.

Then there is the matter of heavily loading public tariffs – electricity, tolls. These are taxes by another name. That’s more headwind.

COSATU welcomes small cut in repo rate

The Congress of South African Trade Unions welcomes today’s 50 basis points cut in the repo rate, to 6.5%, by the South African Reserve Bank`s Monetary Policy Committee (MPC) Although this is too little-too late, we hope that it is a turning point and that the Reserve Bank has finally listened to the debate in the ANC, COSATU and civil society and accepted the overwhelming argument that monetary policy must be guided by a mandate to promote economic growth and job creation, and not just to control inflation.

The federation agrees with the MPC that “the pace of (economic) recovery is expected to remain slow”, and welcomes its recognition that “the improved inflation environment has provided some space for an additional monetary stimulus to reinforce the sustainability of the upswing without jeopardising the achievement of the inflation target”.

Marcus springs surprise rate cut

The Reserve Bank unexpectedly cut the repo rate (interest rate) by half a percentage point yesterday, taking its key lending rate to 6,5%, its lowest for nearly three decades.

Lower inflation, subdued economic growth and the negative effect of gains in the rand played a role in the decision of the monetary policy committee (MPC), which took markets by surprise.

However, Bank governor Gill Marcus took pains to dispel speculation that the rate cut was prompted by a clarified mandate letter from Finance Minister Pravin Gordhan last month.

The letter spelled out a range of factors considered by the Bank when it sets interest rates, making clear that it focuses on growth and employment, as well as inflation.

Reserve Bank MPC decision

The Monetary Policy Committee decided to reduce the repo rate by 50 basis points to 6,5 per per cent per year, see the latest Statement of the Monetary Policy Committee available from the Reserve Bank. 
Next meeting on 12 & 13 May 2010.

... The year-on-year inflation rate as measured by the consumer price index (CPI) for all urban areas returned to within the inflation target range sooner than expected, in February 2010, when it measured 5,7 per cent. The moderation in inflation was fairly broad-based. The main contributors to the inflation outcome were the categories of housing and utilities and miscellaneous goods and services. The former category was driven mainly by electricity price increases of 26,8 per cent, while the latter category was driven by insurance costs relating to housing, health and transport. Food price inflation declined to 1,0 per cent, while communication costs declined by 22,0 per cent. Administered prices excluding petrol and paraffin increased by 10,8 per cent. Producer price inflation increased to 3,5 per cent in February 2010, compared with 2,7 per cent in the previous month. Food price inflation at the producer level remained well contained. Agricultural food prices declined at a year-on-year rate of 13,5 per cent, while manufactured food prices declined by 1,2 per cent. ...

COSATU condemns unchanged repo rate

The Congress of South African Trade Unions is deeply disappointed that the Monetary Policy Committee of the Reserve Bank has yet again missed an opportunity to give some hope to the millions living in poverty and without jobs by cutting interest rates. She has dashed their hope of an end to the economic catastrophe in which they are surviving.

By leaving the Repo Rate unchanged, the Monetary Policy Committee has let down those who were hoping for an end to the rigid conservative policies of former SARB Governor, Tito Mboweni, and condemned the majority of South Africans to more months of struggling to survive.

Although there is some minimal evidence that the economy is beginning to revive, the improvement is far too small to allow for any complacency, and workers and the poor are still mired in a deep recession. As COSATU has been saying for the past years, South Africa has a national emergency, which requires an urgent national response.

While Government, business and labour are starting, albeit too slowly, to implement the many excellent proposals in the Framework Agreement on South Africa’s response to the global crisis, to escape from the recession and save and create jobs, the Reserve Bank is sabotaging their efforts by sticking with policies that take us in the opposite direction.