Kganyago says model shows room for rate cuts
The South African Reserve Bank’s forecasting model suggests there might be room for interest-rate cuts in the next year or two, given how weak the economy is, Governor Lesetja Kganyago said.
While the central bank can play a role to help economic growth, decisions should be supported by other policies and structural reforms, Kganyago said in a copy of a speech posted on the Reserve Bank’s website Thursday.
The central bank’s inflation-targeting mandate drew renewed criticism from political parties and labor unions last week after news that the economy contracted the most in a decade in the first quarter. The ruling African National Congress’s secretary-general, Ace Magashule, said the party had decided the mandate must be expanded to include growth and job creation -- which leading ANC officials later denied.
“To make a marked impact on potential output and employment levels, what is required is the implementation of prudent macroeconomic policies underpinned by credible structural policy initiatives,” Kganyago said. “Tough times call for tough actions. Monetary policy is not a substitute for structural reform.”
The central bank left its key interest rate at 6.75% last month. Two of the five MPC members favored a cut, marking the first time in more than a year that anyone on the panel was in favor of lower rates. The quarterly projection model currently prices in one 25 basis point cut by the first quarter of 2020, while forward-rate agreements foresee a more than 80% chance of a quarter-point cut next month.
The central bank remains committed to its primary mandate of price stability in the “interest of balanced and sustainable growth,” Kganyago said.
Inflation slowed to 4.4% in April and the Reserve Bank’s model indicates price growth will be close to the 4.5% midpoint of the target band over the next few years, “which is where we want it,” he said. “If you want lower rates, you need lower inflation.”
The rand gained 0.2% to 14.8390 per dollar at 8:39 a.m. in Johannesburg Friday.
Comments
Press Office
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation