, PLEASE USE THIS DOCUMENT AS A GUIDE ONLY
2.01. Read the following excerpt from BusinessTech below and answer the questions that follow:
(i) According to this excerpt, with the recent monetary policy stance on keeping the repo rate
unchanged, what effect will this have on the economy? Will this monetary policy approach have
a positive, negative, or neutral effect on the economy? Explain your answer.
The South African Reserve Bank's (SARB) decision to keep the repo rate unchanged at 6.75%
amidst heightened global volatility is indicative of a cautious stance. The effect of maintaining the
repo rate at this level is likely to have a neutral impact on the economy in the short term. The SARB
aims to stabilize the economy by balancing inflation and growth (BusinessTechSA, 2023) .
A stable repo rate generally keeps borrowing costs predictable, which may encourage continued
investment and spending by businesses and consumers. However, if the global economic
environment continues to deteriorate, the SARB has signaled that it may consider rate hikes to
address rising inflationary pressures. The immediate impact of this monetary policy is to avoid
stoking inflation further, which could hinder economic recovery. Thus, in the short term, this policy
is likely to be neutral, providing stability but not stimulating significant growth (ECS3701, Study
Guide, 2026; Miskin, 2023).
(ii) Which monetary policy mandate is the SARB pursuing? Provide a further illustration of the
chosen mandate.
The SARB is primarily pursuing an inflation-targeting monetary policy. This is evident from the fact
that its primary focus is on maintaining inflation within a target range, which has been set between
3% and 6%. This inflation-targeting framework allows the SARB to guide expectations and ensure
long-term economic stability by controlling price levels (BusinessTechSA, 2023).
The mandate is clear: to ensure price stability, which in turn supports balanced and sustainable
economic growth. The SARB achieves this by adjusting the repo rate, which influences broader
economic activity, including consumer spending, investment, and foreign exchange rates. For
example, the SARB's control over short-term interest rates, as highlighted in the guide, directly
influences borrowing and lending behaviors, thus managing inflationary pressures (ECS3701, Study
Guide, 2026; Miskin, 2023).
2.01. Read the following excerpt from BusinessTech below and answer the questions that follow:
(i) According to this excerpt, with the recent monetary policy stance on keeping the repo rate
unchanged, what effect will this have on the economy? Will this monetary policy approach have
a positive, negative, or neutral effect on the economy? Explain your answer.
The South African Reserve Bank's (SARB) decision to keep the repo rate unchanged at 6.75%
amidst heightened global volatility is indicative of a cautious stance. The effect of maintaining the
repo rate at this level is likely to have a neutral impact on the economy in the short term. The SARB
aims to stabilize the economy by balancing inflation and growth (BusinessTechSA, 2023) .
A stable repo rate generally keeps borrowing costs predictable, which may encourage continued
investment and spending by businesses and consumers. However, if the global economic
environment continues to deteriorate, the SARB has signaled that it may consider rate hikes to
address rising inflationary pressures. The immediate impact of this monetary policy is to avoid
stoking inflation further, which could hinder economic recovery. Thus, in the short term, this policy
is likely to be neutral, providing stability but not stimulating significant growth (ECS3701, Study
Guide, 2026; Miskin, 2023).
(ii) Which monetary policy mandate is the SARB pursuing? Provide a further illustration of the
chosen mandate.
The SARB is primarily pursuing an inflation-targeting monetary policy. This is evident from the fact
that its primary focus is on maintaining inflation within a target range, which has been set between
3% and 6%. This inflation-targeting framework allows the SARB to guide expectations and ensure
long-term economic stability by controlling price levels (BusinessTechSA, 2023).
The mandate is clear: to ensure price stability, which in turn supports balanced and sustainable
economic growth. The SARB achieves this by adjusting the repo rate, which influences broader
economic activity, including consumer spending, investment, and foreign exchange rates. For
example, the SARB's control over short-term interest rates, as highlighted in the guide, directly
influences borrowing and lending behaviors, thus managing inflationary pressures (ECS3701, Study
Guide, 2026; Miskin, 2023).
