{"id":1271,"date":"2023-06-05T10:08:59","date_gmt":"2023-06-05T10:08:59","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=1271"},"modified":"2026-03-18T11:46:26","modified_gmt":"2026-03-18T11:46:26","slug":"sa-reserve-bank-fighting-against-dark-forces-in-the-economy","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2023\/06\/05\/sa-reserve-bank-fighting-against-dark-forces-in-the-economy\/","title":{"rendered":"SA Reserve Bank fighting against \u201cdark forces\u201d in the economy"},"content":{"rendered":"

\"\"<\/p>\n

Efficient Group chief economist Dawie Roodt said the South African Reserve Bank (SARB) could try to prevent inflation from getting out of hand, but, eventually, the structural issues in the economy \u2013 \u201cthe dark forces\u201d \u2013 will prevail.<\/p>\n

The SARB\u2019s Monetary Policy Committee (MPC) increased South Africa\u2019s interest rate by 50 basis points on 25 May.<\/p>\n

The decision received a mixed response, with many experts saying the increase would do more harm than good.<\/p>\n

Following the interest rate hike, the rand dropped to its weakest level against the US dollar, which seemed to support this criticism.<\/p>\n

Economist Roelof Botha was one of the critics, arguing that inflation in South Africa is not demand-driven but purely supply-driven.<\/p>\n

Therefore, the SARB\u2019s interest rate hikes will have little effect on South Africa\u2019s high inflation and likely do more harm than good to the economy.<\/p>\n

\u201cThis is unbelievable, and it isn\u2019t necessary because it\u2019s not going to make a dent in our inflation,\u201d he said of the recent rate hike.<\/p>\n

He went as far as calling the Reserve Bank the economy\u2019s biggest enemy and proposed restructuring the MPC.<\/p>\n

\"\"<\/p>\n

Roodt does not share Botha\u2019s view. He told\u00a0Business Day TV\u00a0that the SARB is not to blame for South Africa\u2019s high interest rates and that tightening monetary policy did not weaken the rand.<\/p>\n

\u201cIf the Reserve Bank decided to do nothing, I think the effect could have been much, much worse on the currency,\u201d said Roodt.<\/p>\n

Instead, SARB governor Lesetja Kganyago in his speech, made it \u201cclear that we are in very deep trouble\u201d. This, rightfully, spooked markets, which led to a sell-off of the rand.<\/p>\n

Roodt added that monetary policy alone could not fight inflation. \u201cThe Reserve Bank is not as powerful as we would like it to be,\u201d he said.<\/p>\n

This is mainly because many other factors, which Roodt called the \u201cdark forces\u201d in the economy, are working against the SARB\u2019s mission to control inflation.<\/p>\n

For example, expansionary fiscal policy and continued load-shedding significantly impact inflation but lie beyond the SARB\u2019s control.<\/p>\n

\u201cThe Reserve Bank is probably fighting a losing battle. They can try to prevent inflation from getting out of hand, but eventually, the dark forces will probably win this fight,\u201d he said.<\/p>\n

\"\"<\/p>\n

In the same Business Day TV interview, Intellidex\u2019s Peter Attard Montalto said it is not the SARB\u2019s job to backstop the currency or ensure the levels or yields of bonds.<\/p>\n

However, the SARB does have to \u201cmop up\u201d second-round effects that result from a weak currency.<\/p>\n

These second-round effects explain the SARB\u2019s decision to implement a hawkish hike and likely why it will continue the hiking cycle in the coming months.<\/p>\n

Montalto said the SARB has a straightforward monetary policy approach whereby a single interest rate is used to manage inflation.<\/p>\n

However, he explained that the SARB does not try to \u201cstand in the way of whatever the next print in inflation is\u201d.<\/p>\n

Instead, the central bank focuses on the second-round effects on inflation expectations, where the bank has some control over the long term.<\/p>\n

\u201cThey\u2019re trying to prevent price pressures becoming more generalised, and I think they can and will be effective at that,\u201d he said.<\/p>\n

\u201cBut it\u2019s a long path, and it\u2019s a very loose path, and I think that\u2019s why there can be a lot of criticism because you won\u2019t simply see a pay-off of this hike in terms of inflation in the next couple of months.\u201d<\/p>\n

\"\"<\/p>\n","protected":false},"excerpt":{"rendered":"

Efficient Group chief economist Dawie Roodt said the South African Reserve Bank (SARB) could try to prevent inflation from getting out of hand, but, eventually,…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1271","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1271","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1271"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1271\/revisions"}],"predecessor-version":[{"id":1276,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1271\/revisions\/1276"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1271"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1271"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1271"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}