CURRENT ACCOUNT
How narrowing of deficit may open way to rate cuts
Coupled with the narrowing of the deficit is the easing of inflation in recent months
The narrowing of the current account deficit opened room for more interest rate cuts in 2018, despite the Reserve Bank’s hawkish stance, economists speculated on Thursday following the release of the Bank’s quarterly bulletin. The current account has stabilised, recording a narrower deficit than in previous years. The current account is indicative of trade with the rest of the world. Between 2012 and 2015, the current account deficit averaged more than 5% of GDP. In the third quarter of 2017, the current account narrowed to 2.3% of GDP, from 2.4% the previous quarter. Compared with the same period in 2016, the deficit narrowed significantly from 3.8% of GDP. "Expectations of tighter monetary policy are misplaced," said Capital Economics economist John Ashbourne. While hawkish language from policy makers has heightened the expectations of interest rate hikes in the coming quarters, he said there was a need for tight policy in order to support the deficit, which was pronounced in 2013...
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