How Joburg’s budget destroys the SARB’s balancing act
The MPC’s use of higher interest rates to manage inflation expectations is a blunt instrument to cost pressures that are mainly government-determined, and immune to rate pressure anyway.
Last week, the South African Reserve Bank (SARB) raised the repurchase rate by 25 basis points to 7%. Governor Lesetja Kganyago’s statement was measured and credible; the SARB’s monetary policy committee (MPC) cited the Strait of Hormuz closure, oil near $100 a barrel, services inflation running at 4.6%, and the risk that large overlapping shocks would entrench second-round price effects.
While the decision was defensible on its own merits, what it cannot do is the part nobody is saying clearly enough: manage the impact of constantly rising administered prices.
