Business Maverick: Reserve Bank is likely to cut rates, but how low can it go?

main CPI inflation rate in May was a relatively moderate 4.5%, but a glance at other data would suggest it should be far slower. The official unemployment rate is north of 27% and most analysts reckon it is, in reality, closer to 40%, so in theory at least there should be little in the way of upward wage pressures in the economy. Demand is subdued, to say the least, with retail sales rising a modest 2.4% in April year-on-year. And the economy contracted an eye-popping 3.

In such an environment, one would expect inflation to be much lower. But South Africa is not a classic textbook case for Economics 101, with deep structural issues, such as labour market rigidity and wage hikes that appear to blithely ignore the realities of unemployment. Along with the volatility of the rand and factors such as global oil prices, inflation in South Africa can be hard to contain, and when it does appear contained, its trajectory can be tough to forecast.

Politics are also at play here and in this context, the SARB will likely take a cautious approach. With other central banks, notably in Turkey and the U, under political pressure to cut rates – and the political backdrop here of calls from within the ANC to “expand” the SARB’mandate to include employment and growth, which it already pays attention to – expect the SARB to assert its independence.

South Africa South Africa Latest News, South Africa South Africa Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Some government jobs saw above-average salary growth in recent years – but one industry paid more, fasterA new working paper from the Reserve Bank suggests the private sector may be responsible for driving up salaries in the public sector – and shows which sectors have seen the fastest average growth in remuneration.
Source: News24 - 🏆 4. / 80 Read more »