Johannesburg - Gill Marcus underlined her debut as Reserve Bank governor by saying monetary policy remained "open for discussion" in a speech observers lauded for its blend of openness, transparency and caution.
"We welcome engagement on what the changing economic circumstances require of South African monetary policy," said Marcus. "Monetary policy is an evolving concept."
She was commenting on plans by the ANC alliance - which includes the SACP and trade federation Cosatu - to review the mandate of the South African Reserve Bank (Sarb).
The Reserve Bank's current mandate is to manage the rate of price increases through inflation targeting. The ruling ANC party alliance decided to review this mandate at a summit held over the past weekend.
The alliance has established a task team to work with the Sarb. Marcus said that more clarity on the matter would be provided in February 2010, close to the announcement of the national budget.
The key repo rate was kept on hold at 7%, a decision the governor said was unanimous among monetary policy committee (MPC) members.
Question of Eskom
The risk to inflation in South Africa was identified as power utility Eskom's tariff increases.
Crucially, Marcus said the MPC had worked with a forecast of a 25% increase, and added that the situation was still too "uncertain" to predict Eskom's actual increase.
The bank's outlook on the economy was for real growth in 2010, although at below optimal levels. Marcus outlined certain risks, namely rising unemployment and the jittery South African consumer.
Almost no clues were provided on whether the Sarb will opt to cut rates again in the current monetary easing cycle.
"The fact that they have not done so now does not rule out further easing, but the window of opportunity is closing fast," said Carmen Altenkirch, senior economist at Nedbank.
Transparency
Marcus' maiden address was characterised by an effort to boost transparency into the functioning of the MPC - the team that meets on a monthly basis to determine the position on interest rates - a move that was welcomed by commentators.
"Clearly, [there's] a different style with Gill Marcus giving us clear communication of what has been discussed, rather than just a statement," said Mike Schüssler of Economists.co.za.
The governor was also flanked by a seated committee which did not usually accompany the Sarb's previous head, Tito Mboweni. The team remained silent throughout the proceedings.
"In her first meeting it was business as usual, but refreshingly delivered in her own style," said Johan Botha, senior economist at Standard Bank.
"Markets in general prefer continuity and transparency as characteristics of central banks' conduct," he said.
Marcus confirmed that there will be higher level of engagement between the Sarb and the treasury department.
However, she firmly rejected a suggestion from the audience that her decisions as governor may be swayed by a political mandate.
"I am not a political appointment and there will be no conflict of interest," said Marcus.
"The Reserve Bank seeks to do what is best for all South Africans."
Marcus also announced that the MPC meeting will occur every two months in 2010. The instability in the global financial environment prompted Mboweni to call monthly MPC meetings.
- Fin24.com