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21 May 2009 07:04
Commercial banks are not necessarily passing on the benefits of lower interest rates to consumers, South African Reserve Bank governor Tito Mboweni said on Wednesday evening.
He was speaking at the Sake24 Economist of the Year award ceremony in Kyalami, Johannesburg.
This is the third time this month that the Reserve Bank’s governor has criticised local commercial banks.
“It appears that domestic banks are charging higher spreads relative to prime than was previously the case,” he said.
Mboweni meets with South Africa’s top banks on Thursday to discuss the 3,5% difference between the repo rate and the interest rate that banks charge consumers.
Mboweni, addressing a group made up mainly of economists, referred to the serious issues confronting both model-builders and forecasters at the present time.
“The current financial crisis has forced us all to make a major reassessment of the way in which we have generally perceived the economy to work.
“Previous fundamental relationships and economic correlations we took for granted have come under question and this has caused intense debate in almost all areas of economic discourse in the present difficult and turbulent times.”
Turning to the assumptions used by the South African Reserve Bank in its inflation model, Mboweni said the central bank’s Monetary Policy Committee had assumed at the April meeting that the average contractual price of oil would be at $50 a barrel in 2009 and $55 in 2010.
He added that the MPC’s April meeting had expected growth in South Africa’s trading partners to decrease by 2% in 2009 and expand by one and a half per cent in 2010.
The MPC put administered price inflation—such as the cost of electricity—at 2% in 2009 and at nine and three quarter percent in 2010, Mboweni said.—Sapa
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