MAMOKETE LIJANE: Shallow cuts likely if goalposts are moved
Lower inflation target could result in miserly cutting cycle
The Reserve Bank’s decision to leave the repo rate unchanged last week was expected, but the monetary policy committee (MPC) will struggle to explain taking the same position when it meets in September, unless authorities move to a lower inflation target.
In a 4.5% target world, the MPC should arguably have cut rates at its meeting last week. The Bank’s modelling team forecast that the consumer inflation rate will drift below its 4.5% target in the fourth quarter of this year and remain close to 4% through the second quarter of 2025. If, as the governor always tells us, policy is forward-looking, the more benign outlook for inflation into next year should matter more than recent inflation prints, which say more about where we have been than where we are going...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.