EDITORIAL: Risks make rate cut a gamble
Investment and growth in SA are not being held back by interest rates: the problem is politics and confidence and the lack of any growth drivers
The last time the monetary policy committee met, in March, one member voted for a rate cut. That was even though the meeting just happened to be in that week of the roadshow recall. Indeed, the committee announced its decision to hold rates just hours before President Jacob Zuma’s shock late-night cabinet reshuffle. But at the time that the committee sat, the inflation outlook was looking more benign than before, thanks to a stronger rand and declining food prices, while SA’s growth prospects were looking weak. That should have supported a rate cut, in the eyes of one member, and in subsequent weeks some in the market did start to anticipate a cut, especially after the rand turned out to be much more resilient than expected to the reshuffle and to the rating downgrades that followed. Now, as the committee begins its May meeting, the short-term inflation outlook seems to be even more benign — and growth prospects are even weaker. The drought is ending. The rand is holding up, sort of...
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