BUSA SAYS THE SARB DECISION TODAY TO LEAVE INTEREST RATES UNCHANGED FOR THE PRESENT IS THE RIGHT ONE
Busa believes that the decision by the SARB to leave interest rates unchanged for the moment, after the surprise increase of 50 basis points in January is the right one, taking both external and internal economic factors into account. Busa agrees that, given the balance of risks in the economy at present, priority must be given to the sluggish business conditions currently prevailing in the economy, given the fact that the SARB itself has reduced its growth forecasts for 2014 and 2015 to 2.6% and 3.2 % respectively. The Busa forecast for growth this year is now 2.5%, based on research done within its membership.
Busa appreciates the policy dilemma faced by the SARB in balancing the upside risks to inflation with the downside risks to the growth rate and agrees that the rand remains vulnerable to both domestic and overseas influences. However, Busa is encouraged by the fact that core inflation has remained stable and that ‘pass through’ costs arising from exchange rate depreciation are so far still minimal. Given the fact that both business and consumer confidence are presently at very low levels, leaving the repo unaltered for the time being is a positive factor, even if interest rates In SA at present seem to be only in a holding pattern.
Special Policy Advisor