South African Reserve Bank Governor Gill Marcus said it’s inappropriate to adjust interest rates at the moment even as economic growth probably remained subdued in the fourth quarter.
While the central bank takes a “serious look” at growth, its job is to focus on price stability, Marcus told delegates of the National Union of Metalworkers of South Africa in Johannesburg today.
Africa’s biggest economy expanded an annualized 1.2 percent in the third quarter, the slowest pace since a 2009 recession, as mining output plunged 12.7 percent because of strikes in the platinum and gold industries, the statistics office said yesterday. Marcus last week held the benchmark interest rate at 5 percent as rising fuel and food costs and a weaker rand threaten the bank’s 3 percent to 6 percent target.
“The fourth quarter, the one in which we are now, is likely to be very low,” Marcus said. “We are nowhere where we could be or should be in terms of growth.”
Inflation accelerated to 5.6 percent in October from 5.5 percent in the previous month. The rand has slumped 8.9 percent against the dollar since Aug. 10, when a wildcat strike began at Lonmin Plc’s Marikana mine, adding to price pressures.
“In terms of interest rates, yes we have room to move, when we think its necessary, but we don’t think it is appropriate at this point in time,” Marcus said.
The rand fell 0.4 percent to 8.8788 against the dollar at 3:34 p.m. in Johannesburg from 8.8463 before Marcus began speaking. The yield on the R157 government bond due 2015 rose 1 basis point to 5.49 percent.
“Our job is price stability,” Marcus said. “We take a serious look at growth. We have been very careful to see through the noise.”
While the rand’s move to 8.50 per dollar makes exports more competitive, over time the currency’s weakness is a risk to inflation and borrowing costs, she said. The central bank doesn’t target a level for the rand, she added.