Johannesburg - South African policymakers must take into account the changed global financial and economic environment when making their interest rates decision next week, central bank Governor Tito Mboweni said on Thursday.
He told journalists that while central banks across the
world should not take their eye off inflation they had to keep
in mind the fact that the global financial system had changed.
"All I'm saying is that I'm quite convinced that my
colleagues at the MPC (monetary policy committee) will take
into account the global economic conditions before they take a
decision," Mboweni said at a media function.
The central bank lifted its rates by a total of 500 basis
points between June 2006 and June 2008 to try to tame
inflation, which has stubbornly held above a 3% to 6% target
band, driven by consumer demand as well as rising fuel and food
costs.
But the MPC left rates unchanged in August and October,
partly citing an improved inflation outlook, and bond markets
and some analysts believe the committee will cut rates on December 11, given concerns that the domestic economy is feeling the strain of higher rates and a global slowdown.
Global policymakers - most recently the Bank of England
and the European Central Bank on Thursday - have slashed rates
to breathe life into economies straining under a financial
crisis.
Mboweni said central banks should not take their eye off
the "inflation ball" as the consequences might be too difficult
to bear.
"As central bankers we have to be fully focused on price
stability (but) policymakers around the world have to factor in
their thinking the fact that the global financial system has
changed drastically," he said.
"This notion that South Africa can go on (as if nothing has
changed) does not work. We have to fully take into account the
necessary responses which have been provided."
In a speech to diplomats last week, Mboweni said while
South Africa's inflation outlook had improved, some upside
risks remained, including the impact on prices from a weaker
rand currency, which has lost over 30% of its value
against the dollar so far this year amid global turmoil.
However, in a sign that the Reserve Bank is not deaf to
increasingly vocal concerns over the slowing economy, he said
that a significant slowdown should not be ignored.
South Africa's economic growth slowed to a decade low of
0.2 percent in the third quarter, knocked by interest rates,
which are at a five-year high, and a recession in major
developed economies, putting thousands of jobs on the line.
CPIX Inflation, however, remains high at double the top end
of the 3 to 6 percent target range although it has eased faster
than expected from an August peak of 13.6%, and headline
inflation is seen slowing sharply in 2009.
- Reuters