INTEREST RATES
HILARY JOFFE: Can the Bank be less quick on the draw?
‘The bank has faced some stern questioning from economists, at least in private, about why it didn’t signal the move’
Does the South African Reserve Bank catch the market by surprise every time the interest rate cycle turns?
It’s a question worth asking after the Bank’s monetary policy committee cut rates last week, surprising economists just as it did when it last cut rates in July 2012, and again in January 2014, when it implemented the first of the most recent round of rate hikes. It was not that economists didn’t think the committee made a legitimate case for a cut, given just how far the Bank’s inflation forecasts had come down since the committee last met two months ago. However, good monetary policy is all about transparent and predictable decision making and clear communication. In theory, central bankers should signal their intentions ahead of time so that the market is not surprised. It was this time — and the Bank has faced some stern questioning from economists, at least in private — about why it didn’t signal the move. True, the committee had been saying for a while that the end of the rate hiking cycle might be near. But economists hadn’t expected the committee to cut quite yet. What they ...
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