S. Africa cenbank sees "more moderate" monetary policy response - CNBC Africa

S. Africa cenbank sees "more moderate" monetary policy response


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South African Reserve Bank Governor Gill Marcus. PHOTO: GCIS

This will be more moderate than during a previous tightening cycle from 2006 to 2008, Reserve Bank Governor Gill Marcus said on Thursday.

"Today we have a very different situation, with the output gap being negative and subdued growth in both household consumption and expenditure and credit extension," Marcus said at business dinner.

"We would therefore expect the monetary policy response to be more moderate, given our concerns about the slow growth of the economy."

However, Marcus said the moderate base case she was envisaging was not an unconditional commitment on the part of the bank and would depend on developments.

"It also does not mean that there will be adjustments at every meeting or that if rates are increased, that they will be increased by the same amount," she said.

The bank raised interest rates for the first time in nearly six years in January, hiking the repo rate by 50 basis points to try to stem rising inflation.

The market has priced in further rate hikes this year as the rand tests five-year lows, although expectations are now lower than initial projections for a 200 basis points increase overall.

Marcus said she thought such expectations were overdone and that the market's initial negative reaction to the January rate hike was extreme.