Max Gebhardt
THE rand’s latest fall will push inflation higher, demanding the restrictive monetary policy which has previously forced up interest rates, Reserve Bank Governor Chris Stals warns.
In an exclusive interview with the Mail & Guardian, Stals also says it is anyone’s guess where the embattled currency will settle.
“Any person willing to predict at which level the rand will stabilise, under the present circumstances, would be very brave,” he says.
The rand traded steadier to the dollar this week, trading at R4,71 as M&G went to press on Thursday against R4,6885 at the start of the week.
Stals says previous success in the battle with inflation has been the bank’s greatest achievement since he took office in 1989.
Stals also warns that the latest currency turbulence may delay a hoped-for fall in the current account deficit, piling on the pressure on monetary policy.
A mooted loan from the International Monetary Fund could bolster the country’s meagre foreign exchange reserves, he says. It could also lift foreign investor confidence.
October’s foreign reserve figures, due this week, were expected to have been hit by the bank’s attempts to protect the rand by pumping dollars into forex markets.
Firmer trade figures and the successful Yankee-bond sale are expected to have cushioned the blow.
This week did see some positive economic news. The producer price index for September showed a moderate increase of 0,2% on August’s figure. The figure surprised economists – many had expected a 1,2% rise, swollen by the rand’s fall and higher oil prices. Fears remain that the figure is a statistical anomaly, with bigger rises still to come.
Meanwhile, the South African Chamber of Business released October’s business confidence index, showing confidence among its members has fallen to its lowest level in 14 months.
The chamber is forecasting Christmas sales over the period November/December to hit R30-billion (current prices) from last year’s R26,8-billion.