The South African Reserve Bank’s (SARB) eight-member monetary policy committee (MPC) will be hearing expert testimony on Wednesday and Thursday on a variety of issues.
On Thursday afternoon, South African financial markets will be notified of the MPC’s decision on interest rates. The meeting got under way at 9am on Wednesday.
Among the topics to be discussed will be the latest survey of inflation expectations conducted by the Bureau for Economic Research and the use of a broader consumer inflation-target measure after Statistics South Africa started incorporating a rural component in the current metropolitan and other urban sample.
Most of the attention will be focused on the projections for the course of inflation over the next few months. These projections are drawn up by the SARB’s statistical department.
Critical to the projections are the strength of the rand and the oil price, and a key policy debate will be whether a cut in interest rates will lead to a weaker rand or a small cautionary increase to a stronger rand.
On a trade-weighted basis, the rand is likely to have its strongest monthly average in April 2004 since December 2000.
In 1999, when the SARB cut interest rates eight times in 10 months, the rand remained stable.
The MPC will also be briefed on international and domestic economic data, with these presentations repeated to the media on Thursday.
These presentations will start at 2pm and will consist of four presentations. The presentations are scheduled to finish at 3pm.
The first will be by Logan Rangasamy, the head of the SARB’s International Economic Research Unit, and will be on global economic developments giving recent gross domestic product growth rates in developed and developing economies.
The second will be by Roelf du Plooy, the head of the SARB’s money and capital markets department, on South African domestic financial markets, especially interest-rate developments.
The third will be by Daniel Mminele, the head of the SARB’s financial markets department, and will focus on global financial markets, especially the recent increase in United States bond yields.
The fourth will be by Johan van den Heever, the head of economic reviews and statistics in the SARB’s research department, on South African economic developments.
At 3pm, SARB Governor Tito Mboweni will announce the decision of the MPC on the repo rate live on SABC3, and will then take questions from media representatives.
There is a universal expectation among economists that there will be no change in interest rates.
There is a remote possibility that the MPC may make a cautionary 25 basis-point hike, as it did in October 2000, to caution consumers, banks and pricemakers not to take on excessive debt and to be cautious when raising prices, whether of goods or services. — I-Net Bridge