Call for the Reserve Bank to step in
SARB urged to act decisively with an essential rate cut to boost the economy and jobs.
Ahead of Thursday’s interest rate announcement, Samuel Seeff, chairperson of the Seeff Property Group has reiterated his call for the Reserve Bank to step in with an interest rate cut as a vital stimulus for economic growth and job creation.
A robust cut of at least 25 to 50 basis points is not just desirable, but a critical imperative as the economy stands at a pivotal juncture. We simply can no longer bear keeping the interest rate so high for so long. As it is, he says the overly cautious approach by the Bank has missed at least two opportunities to provide relief to consumers and the economy.
The pressing challenge of unemployment simply can no longer wait. A decisive move by the SARB now would signal a commitment to revitalising economic activity. It would also provide much-needed support to businesses and consumers, and facilitate an environment conducive to investment and job creation.
The case for such monetary easing is strongly supported by the current inflation landscape. Despite the recent benign increase in inflation to 2.8%, it remains comfortably below the Reserve Bank’s 3-6% target range. Despite headwinds out of Washington, the Rand has also strengthened to below R18 to the US Dollar.
This remarkably low inflation level indicates that demand-side pressures are relatively subdued and the risks of igniting an inflationary spiral through a rate cut are minimal at this stage, says Seeff. The stability of the currency provides further mitigation, thus providing a valuable window for the SARB to implement a more accommodative monetary policy stance that directly benefits the domestic economy.
While the recent rate cuts have provided some relief, Seeff says the benefits have now been eroded by keeping the interest rate at least 100 basis points above the pre-Covid rate. Time is ticking and we simply can no longer wait.
Seeff says there is now a golden opportunity for the Bank to act boldly within the available monetary policy space to address the urgent needs of economic recovery and expansion without jeopardising its price stability mandate. A rate cut would inject much-needed momentum into the economy by lowering borrowing costs for businesses and stimulating investment while adding more money into the pockets of consumers to spend in the economy.
While a 25bps cut would be most welcome, Seeff urges the Bank to provide a more robust cut of at least 50bps as an immediate injection of economic confidence to kickstart the economy. Naturally the property market which currently lags the pre-covid volumes will also benefit from a more pronounced rate cut. Aside from enabling more first-time property buyers to get into the market, it is an important economic contributor with a significant economic multiplier benefit, he concludes.
Issued by Gina Meintjes
