MBA.co.za Home

An MBA OverviewChoosing the right MBAApplying for your MBAMBA School DirectoryMBA PerspectivesMBA ResourcesMBA News & EventsMBA Summit




03 DECEMBER 2019
MPC decision is disappointing and unduly cautious

by Raymond Parsons: Professor at the NWU School of Business & Governance and a former special policy adviser to Busa.
It is disappointing that the MPC majority view is unable to contemplate reducing the repo rate, although the space now clearly exists to act positively. The fact that the MPC was divided by a 3-2 vote demonstrates that a strong view does now exist within the SARB for a more flexible approach. Headline inflation subsided to 3.7% in October. And the MPC itself is now also only expecting a growth rate of 0.5% in 2019, with its growth forecasts for 2020 and 2021 also cut further. With the emergence of a much better inflation outlook, MPC majority view is therefore unduly cautious in not wanting to ease borrowing costs in the economy.

And regarding future risks, despite past 'shocks' which sapped the rand, recent evidence has shown that inflation has nevertheless still declined, indicating how weak the cost transmission mechanism has become in changed economic circumstances. There is also a danger that the credibility of the SARB's anti-inflation mandate may be jeopardised if it is continually perceived not be responding positively to tangible improvements in the inflation outlook. The burden of proof for a central bank cannot be absolute certainty.

With inflation now falling well within the official target range, this visible success should therefore be reflected in lower borrowing costs in the economy. Monetary policy can and should now play a useful, if modest, role in helping to strengthen business and consumer confidence at a critical stage in SA's business cycle. It nonetheless remains true that the main burden of promoting job-rich growth in the economy does not ultimately lie with monetary policy, but instead with expediting and implementing the urgent economic reforms to which SA is committed.
Source:

NWU Business School
At the NWU Business School, we strive to change the way our students think about business. We want our students to become managers/leaders in their own right. Visit our InfoCentre or website.

Share: Facebook
Facebook Twitter
Twitter LinkedIn
LinkedIn Email
Email
Share
Other Print
Print Newsletter
Newsletter


About MBA.co.zaMBA NewsletterTerms of UseContact Us