DA questions timing of rate cut

The Democratic Alliance and the New National Party have reacted to the announcement by the South African Reserve Bank (SARB) of a 1% cut in the repo rate.

The DA has questioned why the scheduled meeting of the South African Reserve Bank’s (SARB) monetary policy committee was pre-empted by Wednesday’s special meeting at which a 1% cut in the repo rate was announced.

The NNP has said the cut in the repo rate would particularly benefit the export-based industries in the agricultural, trade and industrial sectors. It also says there is scope for a further interest rate cut of 100 basis points before the end of the year.

Referring to the early announcement by SARB Governor Tito Mboweni of the rate cut, the party said financial markets thrived on stability and “it remains unclear why the committee meeting of the bank in October was pre-empted [by today’s meeting and announcement).”

“The governor should explain why this announcement was made ahead of schedule.”

DA finance spokesperson Pierre Rabie said while his party broadly welcomed the

cut, it was concerned too about the plight of pensioners — who relied on interest income and who would have less money to spend on essentials such as food.

He urged retailers to pass the benefit of interest rate cuts on to the consumer, especially the aged.

“The DA urges all retailers and other business to pass savings they make from the cut in the repo rate … on to those people who will actually be negatively affected by the rate cut. Pensioners and those living on fixed incomes will have less money.”

He said the cut should promote current consumer confidence “to a great

extent”, but the government should show real commitment in tackling issues

threatening economic growth “including the prevalence of HIV/Aids, rampant

unemployment and the flood of crime.” — I-Net Bridge

NNP finance spokesperson Willie Odendaal said the cut “should stimulate the highly necessary growth in the South African economy”.

“When economic development in South Africa is led by export-driven economic activities, it may be expected that more job opportunities will be created. This in turn will facilitate the fight against poverty in South Africa.”

“It is a pity that the … Reserve Bank had not decided earlier to meet more frequently to analyse indicators of the fiscal and monetary status of the economy so that policy changes could be made timeously.”

“The unnecessarily long intervals between meetings of the Bank until now probably resulted in the South African economy cooling down too much.

“The recent announcement [three weeks ago] that the growth rate in the gross

domestic product had dropped to only 1%, indicates that the Reserve Bank should

have considered and implemented further interest rate reductions at an earlier

stage.”

“Clearly there is still scope for further interest rate reductions of at least 100 basis points before the end of the year. The NNP is of the opinion, however, that in future further interest rate adjustments should not be made by more than 50 basis points at a time.”

“Too large adjustments may stimulate inflation, cause the value of the rand to decline too much unnecessarily and eventually undermine the good results

that have already been achieved in South Africa by means of financial discipline.” — I-Net Bridge