Yesterday’s @SAReserveBank MPC decision to drop rates by a token 0,25% displayed yet again the SARB’s callous disregard for our people, our productive businesses, our economy and our nation.
In this thread I will break down the flawed logic in the MPC statement. https://twitter.com/sareservebank/status/1286292055946407936

@KganyagoLesetja started by saying leading nations implemented stimulus packages primarily to support investment. Yet the @SAReserveBank refuses to fund a SAn stimulus package because they say this will scare away investors. This kind of illogical double speak is typical.

The @SAReserveBank expects SAn GDP to drop by 7,3% this year...a very conservative estimate.
In response SARB has thus far dropped rates by 3% in total in 2020.
A 3% drop in rates amounts to an injection of R100bn, 2% of GDP.
Add R30bn QE and total stimulus is a mere 2,6% of GDP.

Inflation is currently at 2,1% and @SAReserveBank predicts upside risks to come from cost push (electricity) and possible drop in supply of goods. Cost push and drop in supply risks are both exacerbated by rates increases which increases producers costs while reducing demand.

Increased rates add to cost push (increasing costs for households, business & producers) while reducing demand for products & services so less profit & less investment due to higher hurdle rates...this leads to less supply due to productive businesses going bust & less investment

The @SAReserveBank MPC dropped rates by a token 0,25%...keeping rates unnecessarily high despite the fact that they don’t see any demand pull inflation risk...only cost push / supply drop inflation, which high rates just exacerbates. Crazy stuff!

Once again the @SAReserveBank does not stay in its lane...calling for “structural changes” that “lower costs, increase investment, growth & job creation”...all of which would happen if SARB lowered borrowing costs for our private sector & goverment & funded productive stimulus.

SAs total debt (private & public sector) is over R6 trillion. Every 1% reduction in interest charges saves SAns R60bn per year...money that we could be saving, investing or spending on each other’s goods and services. The SARB controls interest rates for all R denominated debt.

By keeping interest rates unnecessarily high, @SAReserveBank is adding hundreds of billions in costs to our households & businesses, while reducing demand for our products & services...so we make less income, and save & invest less. Is this deliberate sabotage? What do you think?