Investec’s Brian Kantor is once again knocking on the South African Reserve Bank’s door, pleading with them to focus on the things they have control over. This as the country prepares itself for another Monetary Policy Committee meeting, with economists divided over an expected hike or for rates to remain steady. The repo rate has been increased by 1 percentage point since July 2015 to 6.75%.
Kantor’s concern, and that of the Bank, is stagflation – a slow growth, high inflation environment. And while inflation is usually fought with higher interest rates, the problem is it's not demand driven but influenced by outside factors beyond their control.
Kantor says South Africa’s monetary policy should instead focus on limiting the damage higher interest rates have caused to the economy. And come to the realisation that they will not influence the outlook for inflation. Some great analysis. – Stuart Lowman