Johannesburg, 22 November 2018 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is extremely disappointed over the South African Reserve Bank’s (SARB) decision to hike interest rates by 25 basis points to 6.75 percent, and is concerned that this decision deprives a very weak economy of a much-needed boost.
Speaking after the announcement by the Reserve Bank this afternoon, SEIFSA Economist Marique Kruger said the failure of the SARB’s Monetary Policy Committee to leave interest rates unchanged, at the very least, is disappointing for beleaguered business and over-indebted consumers, especially in the run-up the festive season.
However, Ms Kruger said that given the upside risks that an accommodative monetary policy stance would have on the domestic economy’s inflationary outlook, the decision is understandable. She said it was unfortunate that businesses in the broader domestic economy – and the metals and engineering sector in particular continues to face headwinds, amid increasing operational expenses.
“The generally weaker exchange rate and the higher petrol price impact negatively on the cost of doing business, while increased inflationary pressures caused by an increase in annual consumer price inflation exacerbate the challenging situation,” said Ms Kruger.
She said that given the current state of the economy and the weak domestic demand environment, the decision to increase interest rates will invariably add to the cost of doing business, thereby impacting negatively on the margins of struggling businesses.