R/€ = 15.18Change: -0.07
R/$ = 13.35Change: 0.05
Au 1156.64 $/ozChange: 12.49
Pt 977.50 $/ozChange: 24.50
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 About 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)
Other Economy News
Updated 3 hours ago South Africa's new visa regulations are having an adverse impact on the country's tourism industry without proof that they are making any impact on child trafficking, according to Hussein Dabbas, International Air Traffic Association (Iata) regional vice-president...
Outgoing Seifsa president Ufikile Khumalo
Updated 4 hours ago Downscaling by South African primary steel producers was “unavoidable” despite recent protection measures, outgoing Steel and Engineering Industries Federation of Southern Africa (Seifsa) president Ufikile Khumalo cautioned on Friday. Khumalo is also chairperson of...
President Jacob Zuma
President Jacob Zuma on Thursday said the National General Council took place amid a tumultuous economic climate, however, South Africans have something to smile about. Addressing guests on the eve of the NGC at the Gallagher Convention Centre on Thursday, Zuma...
Latest News
Updated 2 hours 45 minutes ago South African Airways (SAA) has enhanced its partnership with the airline’s in-flight duty-free concessionaire Tourvest Inflight Retail Services (TIRS), enabling Voyager members to earn miles when buying duty-free products and spend their miles when shopping for...
Updated 2 hours 54 minutes ago South Africa's new visa regulations are having an adverse impact on the country's tourism industry without proof that they are making any impact on child trafficking, according to Hussein Dabbas, International Air Traffic Association (Iata) regional vice-president...
Updated 2 hours 57 minutes ago The Council for Scientific and Industrial Research (CSIR) has developed a semi-autonomous solution for early pothole detection to potentially replace the often time-consuming expensive manual road inspection. Showcasing the Visual Surveying Platform (VSP), CSIR...
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
BUSINESS LEADERS PANEL Adam Craker, Ivor Chipkin, Alan Hosking and Allon Raiz at the 6th IQ Business Active Growth conference
At the sixth IQ Business conference held in Sandton last month, a panel of business leaders and academics advocated that business reclaims the initiative to spur growth in South Africa amid fragmented and haphazard political direction. Management consulting firm IQ...
The building industry is an essential component of the South African economy as it contributes about 15% to the gross fixed investment that drives the economy. However, with the country’s economy going through a tough time currently, this, in turn, reflects on the...
The recipients of the 2015 South African National Energy Association (Sanea)/South African National Energy Development Institute Energy (Sanedi) Awards were announced at a ceremony and banquet in Sandton last month. Sanea chairperson Brian Statham named Exxaro CEO...
ASHER BOHBOT EOH’s corporate goals were originally aspirations, but the company is relevant and is making a difference in the territories it operates in
As South African information technology (IT) firm EOH posted another full year of strong growth, CEO Asher Bohbot, known for his frank words, people-centric management style and stoic humanism, attributed the company’s continued South African and African growth to...
International heavy-equipment engine manufacturer Cummins’ regional distribution centre (RDC) in Woodmead, Gauteng, has halved the average logistics distribution time for clients in Southern Africa and allowed for critical or long-lead stock to be kept closer to...
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