The South African Reserve Bank (SARB) left its repo rate steady at 7% on Tuesday, as expected, on balanced inflation risks and signs that sectors of the economy are recovering from last year’s recession.
“The decision of the monetary policy committee, however, was not unanimous,” SARB Governor Gill Marcus said at the press conference following the meeting.
“There were strong voices for a cut, but no one discussed an increase,” she said.
Africa’s biggest economy returned to growth in the third quarter of last year and manufacturing activity, hard hit by a global downturn is picking up, although consumer demand remains weak.
The bank reduced interest rates by five percentage points between December 2008 and August last year to help spur the economy, unwinding previous increases, and its monetary policy committee wants to wait to see the impact of those cuts.
A small minority of analysts had forecast another drop this week to help ease the plight of debt-laden households and to boost demand also knocked by an almost one million jobs lost during 2009. The trade union allies of the ruling ANC kept up their demand for more cuts.
However, uncertainty, and concern, about possible big electricity price increases and relatively high wage demands have clouded the outlook for inflation, which sits at the top end of the central bank’s 3% to 6% target range.
Entrenched in the Constitution
Earlier on Tuesday, the bank, responding to union calls for its nationalisation, pointed out that its independence was entrenched in the Constitution and that it was not owned by anyone.
The central bank said in a statement it had noted the media interest evidently generated by comments made by African National Congress secretary general Gwede Mantashe, and would like to clarify the current parameters within which the SARB operates.
“The main objective of the SARB, as set out in the SARB Act and the Constitution,” it said, “is to protect the value of the currency in the interest of balanced and sustainable economic growth in South Africa. This is achieved through the conduct of monetary policy. Since monetary policy issues and the economy affect society as a whole, central banks worldwide are regarded as public entities that fulfil public interest roles. In practice, the pursuit of this role is not synonymous with the realisation of profits. The SARB is required to conduct its activities in the public interest only, without regard to profit maximisation,” the statement read.
It continued: “The SARB is a creature of statute, with the status of an independent legal person which may not be liquidated other than by an Act of Parliament. Its independence is entrenched in the Constitution and it is not owned by anyone. — Reuters, Sapa, I-Net Bridge