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Press Release – 2014/07/18:STUBBORN INFLATION EXPECTATIONS FORCE DIFFICULT DECISION ON INTEREST RATES

By 17th Jul 2014 Sep 20th, 2019 No Comments

Speaking after Reserve Bank Governor Gill Marcus announced that interest rates will increase by 25 basis points to 5.75% , SEIFSA Chief Economist Henk Langenhoven said the Federation concurred with the Governor on the weakness of the economy, but this was no longer enough reason to keep interest rates unchanged.

“The Governor found it very difficult to report positive trends amongst the abundance of data that became available since the last MPC meeting. The domestic economy is deteriorating and international markets for South African exports are recovering at a very slow pace. Metals and engineering production growth fell from 3,5% in April (on a twelve-month basis) to 2% in May,” said Mr Langenhoven.

SEIFSA has previously stated that the sector cannot afford the continuation of the downward spiral in production and profitability. This is made worse by strong upward pressures on costs.

Ms Marcus said that recorded inflation rates in the economy have accelerated and expectations about future price increases have deteriorated. Simultaneously, recent wage settlements in the economy have been spiralling upward and specific settlements in the mining and possibly the metals and engineering sector will worsen this trend.

Mr Langenhoven said that the metals and engineering sector’s experience of these unfavourable economic trends and the impact of the difficult policy decisions is a microcosm of the pain felt in different degrees in the wider economy. However, he remained hopeful that “the self-

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