/ 25 January 2010

DA calls for SARB’s vigilance on inflation

Ahead of the Reserve Bank's interest-rate decision, the DA has insisted that financial stability requires that the bank remains vigilant on inflation.

Looking forward to the decision of the South African Reserve Bank’s (SARB) monetary policy committee, to be announced this week, the Democratic Alliance has insisted that financial stability requires that the bank remains vigilant on inflation.

Dion George, who speaks for the party on finance, pointed out that interest-rate decisions by the bank relate to the predicted state of the economy in six to eighteen months’ time, and not current conditions. “Even though inflation has fallen below 6% in November 2009, the real question is what the situation will look like by June of this year,” George said on Monday.

He added that the impending Eskom electricity hike, base effects with regard to oil, and higher-than-inflation wage increases over 2009 will exert inflationary pressure.

He also noted that the Sunday Independent reported fresh attempts by members of the national executive of the ANC to undermine the independence of the SARB. “This is unacceptable,” he said. “The independence of the Reserve Bank is crucial to overall financial stability and low inflation — higher inflation hurts the entire economy, especially the poor. So any undue influence on the bank would translate to outcomes that severely restrict the efficiency of the bank in fighting inflation.

“The DA will always protect the independence of institutions, such as the Reserve Bank, that serve a greater interest than immediate populist calls — it is in no one’s interest to have an unstable financial system and hyperinflation, and yet this is what will happen if the independence of the bank is not secure.” — I-Net Bridge