JOHANNESBURG – South Africa’s monetary policy stance remains accommodative as well as its tightening cycle would’ve been more aggressive had economic growth been strong, Deputy Central Bank Governor Francois Groepe said on Friday.
The bank kept loan rates on hold last month, saying the weak economy in Africa’s most industrialised country had persuaded it to pause a cycle of hikes it’s able to resume if price pressures obtained again.
Inflation stood at 6.3% in June
“The moderate nature in the tightening cycle as a result of our concern covering the growth outlook, the tightening could have been more aggressive had the economy been more buoyant,” Groepe said in a speech posted on the bank’s website.
“Furthermore, real interest rates remain relatively low, implying an accommodative monetary policy stance despite the tightening.”
The bank sees economic rise in Africa at 0 % at the moment, after key sectors shrunk as a result of severe drought in the community and falling commodity prices.
Despite the slow growth, the South African Reserve Bank has hiked the real key benchmark rate – now waiting for 7% – by the cumulative 200 basis points since January 2014 inside a bid to take inflation within its target couple of between 3 and 6%.
“The tightening of monetary policy have a negative have an effect on the already weak economy, but failure to act can cause inflation expectations to be unhinged and consequently undermine inflation,” Groepe said.
The central bank said on Thursday the rand’s recent rally had reduced some risk to your inflation outlook, but it was cautiously optimistic concerning the currency strength.
