DURBAN – Further interest rate cuts in South Africa will depend on growth and inflation in coming months and should not be taken as a given, central bank Governor Gill Marcus reiterated on Saturday.
The Reserve Bank unexpectedly reduced rates by 50 basis points to 5.0 percent last week, citing concerns about the effect of a global downturn on Africa’s largest economy.
The bank also cut its 2012 growth forecast to 2.7 percent from 2.9 percent and said the risks to the outlook were negative.
“We had previously thought that we were at the bottom of an interest rate cycle but events unfolded in an unexpected way,” Marcus said of the decision.
Economic analysts have speculated the cut could be the start of another cycle of monetary easing after the bank slashed rates by a cumulative 6.5 percentage points between 2008 and 2010 to spur growth after a recession.
“Further easing however cannot be taken for granted and will be contingent on changing global conditions and well as further inflation and growth developments,” Marcus told an editors’ forum, echoing comments she made at the Bank’s annual general meeting on Friday.
“I should emphasize that it is also important for the markets to pick up the signals from the changing fundamentals in the economy. If the fundamentals or circumstances change all of a sudden, this may lead to a change in policy.”
