South Africa’s central bank Governor Gill Marcus said it was not time to raise interest rates yet to deal with the impact ofhigh power price increases on inflation.
Marcus told News Agency “We’re not there yet,” when asked whether the central bank will be forced to raise interest rates after Eskom was given permission to raise its tariffs by a nominal 24.8 percent this year.
The central bank cut the repo rate by 50 basis points to 6.5 percent two weeks ago, adding to 500 basis points worth of cuts since December 2008.
Union and communist allies of the ruling ANC have been calling for deeper interest rate cuts.
Marcus told News Agency the central bank was facing pressure to cut but she would not be influenced by it.
“Perhaps there should be a recognition that pressure is something I’m used to. I’ve been used to it all my life. So I’m not going to buckle. The heat is always there, it’s the nature of the job,” she said.
Marcus said the central bank’s decision two weeks ago — which surprised the market that expected rates to be left steady — was not due to pressure.
“If the data had not enabled us to do it we would not have done it. There was certainly no pressure in the sense of, ‘this is what is expected of you to do and therefore you must do it’.”
The South African economy came out of its first recession in almost two decades in the third quarter and the pace of the recovery accelerated in the fourth quarter. Growth is expected at 2.3 percent this year, after a 1.8 percent decline in 2009.
But consumer demand, which drove growth to an average 5 percent between 2003 and 2007, was expected to be weak.
SOURCED FROM REUTERS