Repo rate remains unchanged in Marcus' first meeting

Tuesday, November 17, 2009

Pretoria - The Reserve Bank's new governor, Gill Marcus, has delivered her first Monetary Policy Committee (MPC) decision on the repo rate, putting her unique stamp on the regular briefing.

Marcus decided to leave rates unchanged at 7 percent.

The governor, who took over the reigns from Tito Mboweni earlier this month, appeared confident as she took to the podium. Before announcing her decision, Marcus said she had changed the format of the briefing slightly, opting to include the members of the MPC panel who had participated in the two-day meeting.

She would also outline some of the issues that the committee had deliberated on and spend more time than usual on the global issues which affected the South African economy.

The domestic economy would continue on its recovery path, said Marcus, adding however that economic growth was expected to remain below potential for some time due to dependence to some extent on the global recovery.

When coming to the domestic outlook for inflation, she said this remained favourable due to weak demand pressures but the threat to this emanated from possible electricity increases.

Opting not to deviate from the bank's current policy, Marcus announced that the rate would remain unchanged much to the disappointment of cash strapped South Africans.

The repo rate has been left unchanged since September, after it has been cut by 500 basis points since December.

The governor told journalists that the decision had been a unanimous one among the committee members.

Nedbank economist Isaac Matshego said the decision was not surprising. "There was a lot of focus on the global economy and its risk to the local economy. The governor expressed unhappiness with the appreciation of the Rand but added that there is not much the bank can do about it," he said.

Commenting on her maiden briefing as governor, Matshego told BuaNews, that Marcus has been more relaxed than her predecessor.

Standard Bank senior economist Dr Johan Botha, agreed, saying he approach had been a breath of fresh air.

Botha said that the decision was not a surprising one given that both the global and domestic economies were struggling. "Inflation also seems to be under control until 2011, there are no real drivers to inflation on the horizon perhaps with the exception of oil prices," he said.

Regarding the central bank's announced that it had cancelled its MPC meeting for December and that it would revert back to having meetings on a bi-monthly basis like in the past, Botha said the decision could have been based on the fact that the kind of volatility that had prevailed in 2009 seemed to have disappeared.