With Brent crude trading above $100 a barrel, the Rand weakening sharply, and international bond yields still elevated, economists warn that any move to cut interest rates now could undermine the SARB’s hard‑won credibility.
Independent Economist John Loos says a rate cut at this stage would send the wrong signal to markets, especially with consumer inflation expected to rise noticeably by April. “Everybody knows that by April, Consumer Price Index inflation will in all probability be noticeably higher,” Loos said.
He cautioned that lowering rates would risk creating the impression that the central bank is shifting its priority toward stimulating growth at the expense of its primary mandate. “If you were to cut, you start to send a signal to the market of, well, we are going to focus on growth instead of inflation. And the markets do want price stability,” he explained.
Global oil prices have soared amid tensions in the Middle East and disruptions affecting the Strait of Hormuz, raising fears of higher fuel costs across SA in the coming months. At the same time, the Rand has come under renewed selling pressure, weakening toward $1.18 in intra‑day trade this week. A weaker Rand raises the cost of imported goods, further intensifying inflation risks.
Loos emphasised that maintaining price stability is essential for long‑term economic performance. “Price instability in the longer run can even create heightened social unrest,” he said. “So it is important for the SARB, for the longer‑term economic performance, credibility and investor confidence, to be seen to be focused on inflation.”
–SABC/ChannelAfrica–
