R/€ = 15.08Change: 0.17
R/$ = 13.41Change: 0.14
Au 1147.47 $/ozChange: 1.02
Pt 944.00 $/ozChange: 9.50
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Nov 15, 2011

Monetary policy focus remains on hitting inflation target – Marcus

Reserve Bank governor Gill Marcus discusses the country's monetary policy focus. Editing: Lionel da Silva
© Reuse this

The Reserve Bank would maintain its monetary policy focus on achieving the inflation target of between 3% and 6% over the medium term, but would remain sensitive to the domestic economic situation, governor Gill Marcus said on Tuesday.

The “challenging times of uncertainty and possible unthinkable consequences in the European environment”, made it difficult for South Africa to pre-empt its policies, she said at a Swiss Chamber of Southern Africa event in Johannesburg.

The Reserve Bank kept its repo rate at a 30-year low of 5.5% last week.

Marcus said that there was a risk of stagflation in the domestic economy, with inflation rising and domestic growth still sluggish.

It still appeared that inflation was being driven by cost-push factors, as illustrated by the benign core inflation outcomes. However, the interaction between higher headline inflation and inflation expectations of wage and price setters was critical, Marcus said.

“To date inflation expectations appeared to be anchored at around the upper level of the target range, but the longer inflation remained outside the target, particularly if it surprises on the upside, the more precarious these expectations become, and the greater the upside risk to the inflation outlook,” she explained.

The Reserve Bank, she said, saw medium-term inflation outside the target range at this point, and regarded the breach, although extended, to be temporary.

In addition, the weak state of the economy also impacts on the approach taken.

“But we have to be vigilant on both sides. There is always a possibility of upside surprises to growth or a dislocation of inflation expectations from the target range, which could take inflation well above the target range.

“However, on the other side, although our assumption for European growth has been lowered, it does not contain the worst case scenario of a meltdown in the eurozone, which would have severe implications for the global economy and South Africa. Although this is seen as a tail risk, it is not a remote possibility.”

Also, the volatility of the rand would be determined by bouts of risk aversion in global financial markets.

The general expectation, said the governor, was that the rand was unlikely to return to previous levels of below R7 to the dollar, but to appreciate somewhat from current levels.

But, she said that a weaker rand also comes with its advantages, making exports more competitive and imported goods more expensive - providing a boost to domestic producers.

“This is in effect an easing of monetary conditions for domestic producers. However, this advantage will be short-lived if offset by higher wage and other input costs which offset the advantage faced by producers.”

But Marcus pointed out that an accommodative environment could not, on its own, generate the higher rates of growth that the South African economy required for employment creation.

Part of the solution, she explained, would need to come from improving much-needed infrastructure, such as in the energy, rail and ports sectors, which would strengthen export capacity.

There was also a need for sustained efforts to enhance South Africa’s ties with its traditional trading partners and also develop new trading relationships outside the eurozone.

“In these troubled times, it is important that trade relationships are not only preserved but enhanced. We are certainly living in interesting but difficult times, because the possibility that things can go horribly wrong is very high,” she said.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
Latest News
Updated 15 minutes ago World-renowned fuel cell scientist Dr Sharon Blair would like to see South Africa supply 25% of the global demand for fuel cells by 2020, stating that the country has a tremendous opportunity to develop the industry and capture a share of the growing sector. However,...
Updated 38 minutes ago Public Enterprises Minister Lynne Brown should table an uncensored contract agreement between Eskom and one of its coal suppliers owned by the Gupta family, the Democratic Alliance (DA) urged on Wednesday. The Sunday Times reported on September 13 that Gupta-owned...
Updated 54 minutes ago Cosatu's provincial general secretary, Tony Ehrenreich, had strong words for government and higher income groups as union members marched to Parliament on Wednesday. “We want them to tax the people who live in Clifton and Sea Point,” he demanded, saying workers...
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
Sphere Holdings CEO Itumeleng Kgaboesele
Black-owned investment holding company Sphere Holdings plans to raise a further R1-billion in the coming months in support of its strategy to become a leading black industrial enterprise, which could ultimately seek a listing on the JSE.
Energy analyst and EE Publishers MD Chris Yelland warned recently against excessive optimism regarding timescales for the proposed construction of new nuclear power plants (NPPs) in South Africa. He was speaking at a Nuclear Roundtable in Johannesburg. “I think we...
Malawi’s Lilongwe Water Board (LWB) is inviting eligible bidders to prequalify for the board’s efficiency improvement works, which will be implemented as part of the E24-million Lilongwe Water Resources Efficiency Programme.   LWB CEO Alfonso Chikuni explains that...
CROATIA, AN EU MEMBER BUT NOT A TDCA MEMBER On July 1, 2013, Croatia officially became the twenty-eighth member of the European Union (EU). Despite Croatia’s accession into the EU, it is yet to become party to the Trade, Development and Cooperation Agreement (TDCA)...
The Council for Scientific and Industrial Research (CSIR) has announced that its new Inundu airborne electronics testing, evaluation and training pod had made its first test flight on September 10. The successful flight was undertaken from Lanseria International...
Alert Close
Embed Code Close
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96