25 May.
Nedbank Economic Commentary: Monetary Policy Forum.
At the Monetary Policy Forum (MPF) held on 24 May the focus was on rising inflationary pressures against the backdrop of weak underlying economic growth.
In the questions and answer session, many of the questions related to the South African Reserve Bank’s (SARB) role in promoting employment growth and the SARB’s view of the fair value of the rand. The Governor and other MPC members re-emphasised that the SARB’s mandate was to maintain price stability, highlighting that a stable prices and interest rates environment would contribute to economic growth, with former National Treasury Director General and now Deputy Governor Lesetja Kganyago jokingly remarking that he “now believes that the Reserve Bank should be independent”. On the rand, the Governor stressed that the fact that SARB has accelerated its accumulation of foreign exchange reserves – around R54 billion over the past year – does not mean that the Bank is targeting a particular level of the currency. On inflation and the outlook for interest rates, the Governor emphasised that the MPC would be on the lookout for second-round effects of inflation.
Monetary Policy Review (MPR): outlook for economic growth
The global economy continued to improve since the last MPR, The pattern of international growth has remained uneven, with growth in the industrialised economies outpaced by that in developed economies. Despite recent reasonable economic performance rising commodity prices, the European sovereign debt crisis and the tragic events in Japan pose a risk to the sustainability of the recovery.
The local recovery also remains fragile. However, the SARB projects real gdp growth of 3,6% in 2011 and 3,9% in 2012, slightly higher than the 3,2% and 3,5% expected at the time of the previous MPR.
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