As business confidence languished near its weakest levels in two decades, the SA Reserve Bank insisted that cutting interest rates is not a remedy for the country's economies woes that are threatening the loss of its remaining investment grade.
The Bank, which sees inflation accelerating towards the upper end of the target, has come under political attack from elements who think it should do more for an economy struggling with an unemployment close to 30%. Subdued business consumer and business confidence and the Bank's own business cycle indicator show little sign of a recovery anytime soon.
“ It is up from an extremely low base in the third quarter,” said RMB chief economist Ettienne Le Roux. “This is a case of one swallow does not a summer make.” Next year’s February budget would have to “show a path back to sustainable fiscal policy to improve confidence numbers”, he noted. Such a step could see billions of rand of investor money deserting the country, pushing the currency weaker and putting upward pressure on interest rates.
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