Reserve Bank has careful balancing act to manage, Francois Groepe says
We do not want to unduly constrain an already weak economy, but we must also ensure that the average South African’s purchasing power remains intact, he says
The SA Reserve Bank’s monetary policy committee (MPC) will face a difficult balancing act as it juggles a weak economy with inflationary pressures, the Bank’s deputy governor Francois Groepe has cautioned. “We do not want to unduly constrain an already weak economy, but we must also ensure that the average South African’s purchasing power remains intact,” he said, in a speech at the UBS Economists Conference in Cape Town, posted on the Bank’s website. The repo rate may rise gradually over the medium term to keep inflation within the 3%-6% target range, which will be based on “the forecast and the balance of risks as these stand at the time of each meeting”, Groepe said. The next meeting of the MPC is at the end of November. Groepe said SA’s inflation outlook in particular faced external risks over the coming months. The first is potential a sharp and sustained drop in capital inflows, as US interest rates increase, while the second is a substantial rise in oil prices. This is furthe...
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