South Africa Leaves Monetary Policy Unchanged


At its September 2014 meeting, South African Reserve Bank left the repo rate unchanged at 5.75 percent, following last meeting’s 25 bps hike and saying that monetary policy remains accommodative, and will continue to be supportive of the domestic economy.

Excerpts from the statement by Gill Marcus, Governor:

The MPC remains concerned about the risks of a wage-price spiral, should settlements well in excess of inflation and productivity growth become the economy-wide norm. Such developments could also undermine South Africa’s international competitiveness and delay the current account adjustment.

The deterioration in the longer term inflation trajectory relative to the previous forecast is a result of the revised tariff increases granted to Eskom by Nersa. The view of the Committee is that such relative price adjustments should not be reacted to automatically. However, while the focus of monetary policy should be on the second round effects of these increases, this is complicated given the multi-year nature of the adjustment.

While inflation is the primary focus of the Committee, the MPC is also mindful of the anemic state of the domestic economy, rising unemployment and the downside risk to its growth forecast. Domestic expenditure has deteriorated further, particularly private sector fixed capital formation, and, together with continued moderation in household consumption expenditure, is indicative of the lack of demand pressures in the economy.

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.

South Africa Leaves Monetary Policy Unchanged


Reserve Bank of South Africa | Joana Taborda | joana.taborda@tradingeconomics.com
9/18/2014 2:42:03 PM