BUSA supports Reserve Bank's decision

Friday, May 13, 2011

Pretoria - Business Unity South Africa (BUSA) has expressed its support to keep the repo rate unchanged at 5.5 percent.

"BUSA agrees with the decision by the Reserve Bank today (Thursday) to leave interest rates unchanged for the time being. This is a realistic reading of external and internal economic factors. The domestic economic recovery is still modest and the global economic outlook remains uncertain," BUSA said.

This as the Reserve Bank's Monetary Policy Committee (MPC) on Thursday left rates unchanged.

BUSA is still concerned about the extent to which continued rises in administered prices pose a risk to the inflation outlook, adding that unless a more coordinated approach is taken to decisions on administered prices this trend will have a very negative impact on the cost structure of business.

"At a time where a number of key wage negotiations are under way, BUSA also agrees that it is important that remuneration levels as a whole should remain reasonable and closely linked to productivity," said BUSA.

This as the Reserve Bank pointed out that wage settlements are above inflation.

The central bank also slightly modified its growth forecast from 3.7 to 3.6 percent for 2011.

"The fact remains that this revision is in a context in which inflation is now expected to breach the upper limit of the inflation target range in the first quarter of 2012. This again emphasizes the careful balance which monetary policy needs to keep in its decisions on interest rates," said BUSA.

Since December 2008, the repo rate has been cut by 650 basis points.

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