BRIAN KANTOR: A bad reason to keep monetary policy on a destructive path
The Reserve Bank’s MPC has denied the hard-pressed economy relief on the basis of factors it can neither know for certain nor influence
Last week, the Reserve Bank’s monetary policy committee (MPC) found reasons to deny any relief to the hard-pressed South African economy in the form of lower short-term interest rates. And to do so despite the very good prospect of lower inflation and still slower growth to come. According to its statement: "The MPC assesses the risks to the inflation outlook to be more or less balanced. Domestic demand pressures remain subdued and, given the continued negative consumer and business sentiment, the risks to the growth outlook are assessed to be on the downside." Concern about the possible direction of the rand appears as the principal reason for the MPC to delay any action on interest rates and wait for further evidence of lower inflation. To quote the MPC further: "The rand remains a key upside risk to the forecast. The rand has, however, been surprisingly resilient in the face of recent domestic developments. This is partly due to offsetting factors, particularly positive sentiment...
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