ECS3701
ASSIGNMENT 2 SEMESTER 1 2025
UNIQUE NO.
DUE DATE: 9 MAY 2025
, ECS3701 Assignment 2 – Semester 1, 2025
Question 1A: Effect of the SARB’s Current Monetary Policy Stance on the
Economy
The South African Reserve Bank (SARB) has opted to maintain the repo rate at 7.5%,
following a cumulative 75 basis point reduction earlier. This current stance can be
described as neutral to slightly accommodative in the short term.
Neutral, because the SARB is neither tightening nor further loosening policy. By
holding the rate steady, the central bank signals a wait-and-see approach.
Slightly accommodative, as the previous rate cuts still have lingering effects on
the economy. Lower borrowing costs encourage increased credit uptake,
supporting both consumer spending and private investment.
The decision reflects macroeconomic caution amid heightened global
economic uncertainty, especially regarding international trade tensions and
fluctuating commodity prices. It suggests the SARB is attempting to balance
inflation expectations with the need to stimulate domestic growth.
In this context, the policy aims to maintain financial stability while providing continued
support to economic activity through the lagged effects of earlier monetary easing.
Question 1B: Was SARB’s Decision to Hold Rates Appropriate Given Trade
Tensions and Uncertainty?
Yes, the SARB’s decision to hold the repo rate steady was appropriate and strategically
sound under current conditions of global trade tensions and economic uncertainty.
Justification:
The SARB’s cautious approach is consistent with the transmission mechanism of
monetary policy:
ASSIGNMENT 2 SEMESTER 1 2025
UNIQUE NO.
DUE DATE: 9 MAY 2025
, ECS3701 Assignment 2 – Semester 1, 2025
Question 1A: Effect of the SARB’s Current Monetary Policy Stance on the
Economy
The South African Reserve Bank (SARB) has opted to maintain the repo rate at 7.5%,
following a cumulative 75 basis point reduction earlier. This current stance can be
described as neutral to slightly accommodative in the short term.
Neutral, because the SARB is neither tightening nor further loosening policy. By
holding the rate steady, the central bank signals a wait-and-see approach.
Slightly accommodative, as the previous rate cuts still have lingering effects on
the economy. Lower borrowing costs encourage increased credit uptake,
supporting both consumer spending and private investment.
The decision reflects macroeconomic caution amid heightened global
economic uncertainty, especially regarding international trade tensions and
fluctuating commodity prices. It suggests the SARB is attempting to balance
inflation expectations with the need to stimulate domestic growth.
In this context, the policy aims to maintain financial stability while providing continued
support to economic activity through the lagged effects of earlier monetary easing.
Question 1B: Was SARB’s Decision to Hold Rates Appropriate Given Trade
Tensions and Uncertainty?
Yes, the SARB’s decision to hold the repo rate steady was appropriate and strategically
sound under current conditions of global trade tensions and economic uncertainty.
Justification:
The SARB’s cautious approach is consistent with the transmission mechanism of
monetary policy:
