Disappointment at Unchanged Repo Rates

November 23 - The Reserve Bank announced last week that it would not be cutting repo rates, a decision reached by the Monetary Policy Committee (MPC).

Many homeowners had been hoping that a cut would ease their monthly home loan payments and provide a welcome relief from the effects of the recession which has taken its toll on household expenditure.

The new Governor of the Reserve Bank, Gill Marcus defied calls from trade unions and leftist groups to slash interest rates and said that the economy is on course to exit the recession.

"Most forecasts suggest that positive growth will have resumed by the fourth quarter of 2009, but there is less unanimity about the third quarter income," said Marcus.

The leader of the South African Communist Party, Blade Nzimande said that the high interest rates were "throttling" the poor and only benefitting the commercial banks.

"The major beneficiaries of the monetary policy in the past have been the banks," he said. "They have made a killing. Yet the very same banks are not investing back."

"We are worried that what we call the Reserve Bank is not a state bank, it's a private bank," continued Nzimande. "You get all those private people who are sitting in that monetary policy committee with no input from anywhere else other than from amongst themselves, that's what we have a problem with."

Nevertheless, economists welcomed the repo decision. "I think we have paved the way for keeping rates on hold for now," noted one economist. "We think inflation could surprise to the downside so we still believe that there is scope for one more cut, perhaps in quarter one or quarter two next year. But for now, the way the statement reads, it would seem as though an unchanged decision is pretty much the way we are going to go for now."

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11/23/2009 10:03:47 AM