Reserve Bank Governor Tito Mboweni has announced an early meeting of the monetary policy committee (MPC).
The meeting, scheduled for March 23 and 24, will be the first in a series of monthly meetings due to be held for the rest of the year. Previously the MPC met on a bi-monthly basis.
Economists predict that the decision heralds the first in a series of interest rate cuts, intended to help the economy cope with the effects of the global financial crisis.
By Thursday morning the rand was performing well on the back of this news, edging up to R9.6850 to the dollar from a previous close of R9.6100, according to Inet Bridge.
Economist Mike Schussler said the decision to increase the number of meetings increases the flexibility of the bank to implement monetary policy. ”This is a clear message to the market and to the public that we are likely to see interest rate declines from now on.”
Although predicted rate cuts will benefit the local economy, Mbonweni’s decision is, in part, in response to international developments, Schussler said.
Mboweni confirmed this, saying there was a need for more frequent MPC meetings to take account of the rapid changes to the global economic environment, its impact on South Africa’s economy and the outlook for local inflation, growth and jobs.
The Financial Times reported that internal draft forecasts by the International Monetary Fund show an expected 0.6% shrinkage in the world economy, rather than the 0.5% growth that was previously forecast.
Developments such as these have prompted decisive action from G20 countries including our own, said Schussler. The world economy is ”coming to a standstill”, he said.
Data provided by economists.co.za showed that countries forming part of the Organisation for Economic Cooperation and Development have seen production levels on an annualised rate plummet by almost 25% in the past year.
”Our biggest concern is that global economic and financial conditions have changed for the worse and it is therefore folly to think that South Africa will not experience an impact,” said Mboweni.
