Some might view SARB MPC decision as ‘overly cautious’

Reza Hendrickse, Portfolio Manager at PPS Investments.

By: Reza Hendrickse, Portfolio Manager at PPS Investments.

The Monetary Policy Committee (MPC) once again voted to keep rates on hold this month, having last cut rates in July. The Committee was split three to two in favour of staying on hold, despite inflation having steadily surprised on the downside in recent months, arguably having provided ample scope for a cut.

Some might view the decision as overly cautious, particularly given the prevailing low growth backdrop, which has contributed to disinflationary pressures. The decision to remain on hold though, was predominantly driven by the view that the MPC would like to see inflation expectations moderate further to the midpoint of the target band. The Quarterly Projection Model (QPM) predicts a rate cut of 25 basis points in the third quarter of 2020, but this is viewed as data dependent.

The MPC’s reluctance to cut rates remains in contrast to US policy, which has seen three rate cuts so far this year. Muddying the waters slightly, is the growing possibility of a negative Moody’s credit rating announcement next year, which the committee probably has had to start factoring into their decision-making.

The potential negative effect on inflation that a downgrade might have via a weaker currency, is likely to be in the back of the committees’ mind as something to pre-emptively manage.

Looking ahead, should inflation continue to surprise on the downside going forward, it would provide decisive room for lower rates locally, without negatively affecting SA’s relatively attractive real interest rate level compared to the rest of the world, which the MPC has sought to preserve.



Latest


18 Jan 2021
SA failed to get its act together on vaccines: here’s how

By Shabir A. Madhi, University of the Witwatersrand South Africa has an estimated population approaching 60 million. To achieve herd immunity against COVID-19,…

SA failed to get its act together on vaccines: here’s how

By Shabir A. Madhi, University of the Witwatersrand South Africa has an estimated population approaching 60 million. To achieve herd immunity against COVID-19, the government recently set the ambitious goal of vaccinating 67% of the population – roughly 40 million people. According to the outline of this plan, this would be achieved within 2021. But…

18 Jan 2021
Foreign holdings of nominal SAGBs increase to 35.7% in December

By RMB Research According to the National Treasury (NT), combined holdings (fixed-rate and inflation-linked) of government bonds increased to 29.9%…

Foreign holdings of nominal SAGBs increase to 35.7% in December

By RMB Research According to the National Treasury (NT), combined holdings (fixed-rate and inflation-linked) of government bonds increased to 29.9% in December from 29.7% in November. Nominal (fixed-rate) SAGBs: Investor holdings as at the end of December 2020 are as follows:Non-resident investors hold 35.7% (R791.78bn).Monetary authorities hold 22.6% (R501.79bn).Official pension funds…

18 Jan 2021
Getting to grips with private market investments

Investors put their money in expert hands to grow it through investments in shares, bonds, cash and property. These are traditional investment…

Getting to grips with private market investments

Investors put their money in expert hands to grow it through investments in shares, bonds, cash and property. These are traditional investment types available on the stock exchanges of most public markets. However investors can also choose to invest in alternative investments – available in private markets. This gives them access to investment types that are not available…

12 Jan 2021
Steven Nathan steps down as CEO of 10X Investments

After 15 years at the helm, 10X Investments’ founder and CEO Steven Nathan has resigned, effective 31 December 2020, in…

Steven Nathan steps down as CEO of 10X Investments

After 15 years at the helm, 10X Investments’ founder and CEO Steven Nathan has resigned, effective 31 December 2020, in order to pursue other interests.  This is according to a statement issued today. The statement says: In line with 10X’s succession plans, the company’s Executive Chairman, Henk Beets, will assume responsibility…


Top stories


10 Sep 2020
How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key…

How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key that dubbed America “The land of the free”, which stuck, to the unforgettable Mel Gibson monologue where an army of painted Scots were willing to trade their lives for the…

13 Apr 2020
Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19…

Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19 environment and what form a global market recovery will take.

13 Apr 2020
SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The…

SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The draft Bill, together with its explanatory memorandum, provides clarity with regards the tax relief measures President Cyril Ramaphosa announced on 23 March.

10 Apr 2020
When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved…

When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved to be most enterprising in acclimatising to challenges as they arise.


Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za