No further repo rate cut says Reserve Bank, increases expected in both Q2 and Q3
[If I were governor] I would have cut!Xhanti Payi, Economist and founding director - Nascence Advisory and Research
South African Reserve Bank (Sarb) Governor Lesetja Kganyago has announced that the repo rate will remain unchanged at its all-time low of 3.5%.
On Wednesday, Stats SA reported that consumer inflation for 2020 was the lowest in 16 years.
Sarb's Monetary Policy Committee (MPC) held its first meeting of 2021 this week as the country battles the second wave of coronavirus infections.
The Monetary Policy Committee has decided to hold the repurchase rate at 3.5%, with effect from 22 January 2021. The implied policy rate path of the Quarterly Projection Model (QPM) indicates two increases of 25 basis points in the second and third quarters of 2021 #SARBMPCJAN21— SA Reserve Bank (@SAReserveBank) January 21, 2021
New waves of infections are likely to periodically weigh on economic activity both globally and locally, noted Kganyago.
"In addition, constraints to the domestic supply of energy, weak investment and uncertainty about vaccine rollout remain serious downside risks to domestic growth".
Bruce Whitfield discusses the widely expected rate decision with economist Xhanti Payi, founding director of Nascence Advisory and Research.
We must think, what would it achieve to cut?Xhanti Payi, Economist and founding director - Nascence Advisory and Research
We must ask some serious questions around what the Reserve Bank is still trying to do with this monetary policy. Maybe we need to re-think that question given this idea of economic reconstruction and the changes in the post-Covid world...Xhanti Payi, Economist and founding director - Nascence Advisory and Research
Monetary policy can't do much anymore - we need structural adjustments.Xhanti Payi, Economist and founding director - Nascence Advisory and Research
Two members of the MPC voted in favour a rate cut, against three no votes.
The main point is that a lot of businesses are struggling... lots of people are under a lot of pressure... banks are reporting reduced incomes...Xhanti Payi, Economist and founding director - Nascence Advisory and Research
So it [a rate cut] would be helpful in some ways but it wouldn't help us to invest for example in new businesses... in extraordinary circumstances.Xhanti Payi, Economist and founding director - Nascence Advisory and Research
For more detail, listen to the audio below:
Source : @SAReserveBank/Twitter
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