The final 2019 Monetary Policy Committee statement delivered by the South African Reserve Bank governor, Lesetja Kganyago, struck a number of doveish notes that may have briefly raised hopes among those listening to his delivery that a rate cut was in the offing.Although GDP growth rebounded to 3.1% in the second quarter, longer-term weakness in most sectors remains a serious concern.
Alongside global trade tensions, it cited the fact that: “Public sector financing needs have risen, raising the prospect of further pressure on the currency and pushing borrowing costs for the broader economy higher.” One suspects that this is what focused the minds of the MPC pair that voted for a cut to give some monetary stimulus to a flagging economy that is not getting the structural boost it needs from government.
But the statement struck a cautious note: “The overall risks to the inflation outlook are assessed to be balanced, but… food price inflation has continued to surprise to the downside, but rising imported food prices and uncertain domestic weather patterns raise uncertainty about the future price trajectory. Further upside risks to the inflation outlook include wage growth and fuel, electricity and water prices.
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