ECS3701 Assignment 2 Semester 1 ANSWERS 2026 - Due 17 April 2026

2.01 Read the following excerpt from BusinessTech below and answer the questions that follow: The South African Reserve Bank (SARB) has decided to keep interest rates unchanged amid heightened volatility in global financial markets caused by the conflict in the Middle East. This leaves the repo rate at 6.75% and the prime lending rate at 10.25%. The decision was unanimous, with all six members of the MPC voting to hold. The decision did not come as a surprise, as economists and analysts had anticipated the position. Also in-line with market expectations, the central bank signalled possible rate hikes, if its baseline assumptions deteriorate. The SARB joins a large number of central banks around the world that elected to freeze their rates as the United States’ war in the Middle East rages on. The path for South Africa’s interest rates took a turn for the worse when the US and Israel launched attacks on Iran at the end of February 2026. Source: Reserve Bank holds interest rates in South Africa (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. [5] (ii) Which monetary policy mandate is the SARB pursuing? Provide a further illustration of the chosen mandate. Question 2,5 Question 2.4 Question 2.6