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Mpc Analysis Jan 2012

In: Business and Management

Submitted By fiishn
Words 898
Pages 4
On the 19th of January 2012, the Monetary Policy Committee (MPC) announced that the repo rate was to remain unchanged at 5.5% which in turn resulted in the prime rate remaining unchanged at 9%. This decision was the seventh consecutive decision to keep rates unchanged which is consistent with the Reserve Bank’s policy of maintaining low market volatility. Since the previous MPC meeting growth prospects have weakened and the outlook for inflation has deteriorated. Jill Marcus focussed a great deal of her speech on the drastic uncertainty that currently exists in world markets as well as the fine balance that needs to be maintained between accurate inflation targeting and growth prospects in the South African economy. In the current economic environment uncertainty is extensive and all-encompassing. One of the bank’s major considerations was to maintain orderliness of markets and to provide as stable an environment as possible to enable the South African public to make informed future planning decisions.
The central bank has a dual objective of fostering growth in the South Africa economy as well as targeting a reliable inflation band of 3-6%. As these two objectives are often inversely related, the MPC’s decision making process is a difficult one. Many financiers argue that the primary objective should be to provide South Africa with a stable and predictable inflation rate to enable business and individuals to set accurate budgets and plan for the future. However Trade Unions, COSATU and many economists argue that growth of the economy and job creation is of a greater concern. The trade-off between the two objectives is the MPC’s greatest challenge.
The credibility of the South African Reserve Bank (SARB) is of vital importance in the process of an inflation targeting policy. By gaining the trust of the public over the past number of years, by successfully…...

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