The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) was split three ways at its latest June 10-12 meeting, with the final decision of a 1,5 percentage point reduction in the repurchase rate resulting from a compromise, according to SARB Governor Tito Mboweni.
Addressing members of Parliament’s Portfolio Committee on Finance on Tuesday, Mboweni provided some insight into the MPC’s deliberations, saying that of the 8-member MPC, three had wanted a 100 basis point rate cut, three had wanted a 150 basis point rate cut and two had wanted a 200 basis point rate cut.
After each person arguing their case and sticking to their decision, Mboweni himself had proposed the 1,5% compromise and that had been agreed by the MPC as a whole, the governor revealed.
“We don’t vote, instead I called for a compromise and this is how we finalised our decision — we have to agree by consenus.”
He added that the downward revision of inflation data by Statistics South Africa on June 30 had not influenced the MPC’s decision to reduce rates in general, but could have played a role in determining the magnitude of the cut.
“The revised inflation data did play some role in the decision, but whether the figures had been revised or not, we would probably have opted to cut the repurchase rate. It might have impacted the magnitude of the cut, but this was not given as a reason by MPC members in their explanations for their proposed reductions in rates.”
Mboweni added that the SARB was currently “okay” with the composition of CPIX (headline consumer inflation less mortgage costs) it uses in its inflation targeting regime. – I-Net Bridge