Rates stay put, Marcus goes

More comments from Fin24 users:

John Taylor - Obviously she has seen very clearly the writing on the wall. Sinking ships & rats come to mind here. The fiscus can't support the ongoing corruption and she well knows it. Thanks anyway Gill for doing a sterling job whilst you were at the helm. In no way can I blame you for leaving. Good luck.

Anneline Pieterse Payne - Really hope Trevor Manual gets to be our new governor.

Fin24 user LLeko Zulu commented: Let's pray it's not the SABC Ellen Tshabalala (who will succeed Gill Marcus) since she's about to be suspended by the portfolio committee of communication, or Khulubuse Zuma.

Reaction of Fanie Brink, agricultural economist, on latest rates announcement:

Monetary policy is starting to destroy growth in SA, because it suffocates the most basic factors that could bring about economic growth, namely demand and supply. Therefore Sarb should rather have reduced its lending rate today by at least 200 basis points (or 2 percentage points) from 5.25% to 3.25% and cancelled its inflation targets.

Read Gill Marcus's last Monetary Policy Statement as Sarb governor

MARCUS TO STEP DOWN

"This is my last MPC. I have advised the president some time ago that I would not be available for renewal," Governor Gill Marcus said.

"I think that it's an important question around building a team.

"I think the bank has an outstanding team of leadership, both in the executive, monetary policy, leadership, management of the bank.

"Therefore, I'm quite comfortable saying that I'm very happy that whoever the president chooses to succeed as the next governor will continue with the strength of this institution and do an excellent job."

After announcing that the repo rate (the rate at which the Sarb lends money to commercial bank) will stay unchanged, governor Gill then announced she would be stepping down on November 8 at the end of her five-year term, sending the rand to R11.1095/$, its weakest since February. - Reuters

Marcus stepping down

John Loos FNB economist: We expect gradual interest rate increases early next year.

John Loos FNB economist: Savings problem in SA is a generational thing – often you need a big crisis for people to become conservative and save – like a world war.

Sarb comments on interest rates in a nutshell - (Reuters)

ECONOMIC GROWTH

The bank's forecast for GDP growth for 2014 has been revised down further to 1.5% from 1.7% previously, with the risks still assessed to be on the downside.The forecast for both 2015 and 2016 have been revised down by 0.1% to 2.8% and 3.1% respectively.The bank's leading indicator of economic activity continues to trend sideways consistent with the subdued growth outlook.

INFLATION

The inflation forecast for 2016 increased to 5.8% from 5.6%, mainly as a result of the revised electricity price assumption following the review of Eskom tariffs by Nersa. The revised assumption makes provision for electricity price increases of 11.6% from July 2015 and again from July 2016.The deterioration in the longer term inflation trajectory relative to the previous forecast is a result of the revised tariff increases granted to Eskom by Nersa. The view of the Committee is that such relative price adjustments should not be reacted to automatically. However, while the focus of monetary policy should be on the second round effects of these increases, this is complicated given the multi-year nature of the adjustment.

POWER SUPPLY

Adding to prevailing concerns are indications from Eskom that electricity supply constraints may be more severe and endure for longer than previously expected.

John Loos FNB economist: One of key shortcomings of consumer in SA is the lack of savings.

Questions already being asked over who will succeed Gill Marcus

Against a backdrop of sluggish economic growth, subdued income growth, rising municipal rates and utilities tariffs, and slightly higher CPI inflation which increased to 6.4% in August (2014) from 6.3% in July, today’s decision by the Monetary Policy Committee to keep the repo rate stable is good news, particularly for mortgage-dependent homeowners and aspirant home buyers requiring access to finance, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

Today’s decision by the Reserve Bank’s Monetary Policy Committee to keep the repo rate unchanged at 5,75% (9,25% mortgage loan rate) is welcome news as the housing market continues its upward trend, says Seeff chairman, Samuel Seeff. For the first time since the 2007/8 down-turn, sales activity is showing real upward movement, not only in the primary urban sectors, but also in the secondary coastal markets.

John Loos FNB economist: For foreseeable future I do not see a problem with the level of consumer demand. It is more about the rand and I think when we get to Fed hiking time in 2015, if Sarb does not gradually raise interest rates, it will put pressure on the rand. We think early in 2015 Sarb will start to hike interest rates again.

Gill Marcus's last MPC meeting, it seems. Will verify

John Loos FNB economist: Marcus expressed concern about wage impacts in SA as it is a key driver to our inflation rate. Things like Eskom price hikes are also big impacts.

FNB economist John Loos: CPI is ultimate target but you must look at all the variables reacting on it. So what the Fed and US data do, affects SA on what it does to the rand so indirectly we do respond to what happens in big economies like the US.

Longer breather for borrowers. Debt experts advise to pay off debt faster while rates still low.

MPC decision was 6 versus 1 to keep it unchanged.

MPC: in 2014 had unusually long work stoppages which were difficult to factor into growth forecasts.

MPC: Main adjustments to our forecast has come on the growth side – last year we predicted 2.8% for 2014 and it is now down to 2.5%.

MPC: From meeting to meeting the overall inflation trajectory and how we see growth and indicators evolving and international developments are what we look at and it might become confusing in the next few months.

Marcus: Medium term budget policy statement is in October so not for us to now comment on monetary or fiscal policy – that should be directed to the National Treasury.

Marcus: We are also talking dollar strength not just about rand weakness.

MPC: Rand movements mainly influenced around normalisation of global monetary policy, especially in US. Domestically also reaction to current account deficit.

Marcus: We have moved 75 basis points so far this year and our feeling is that indications are for hold at this time.

Marcus: MPC decides to keep repo rate unchanged this time.

Marcus: While inflation is primary focus of MPC, it is also aware of downside risks like domestic spending deteriorating. MPC still feels interest rates would have to normalise over time.

Marcus: Currency weakness remains key consideration and MPC also worried about a wage spiral which could undermine SA’s international competitiveness.

Marcus: Despite slight near term improvement in inflation outlook, MPC is concerned of it remaining close to upper end of band.