, ECS3701 Assignment 2 (COMPLETE ANSWERS) Semester
1 2025 (871621) - DUE 9 May 2025; 100% TRUSTED
Complete, trusted solutions and explanations.
(a) 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 a more neutral effect on the economy? Explain your answer. [5]
In South Africa, the South African Reserve Bank (SARB) recently
decided to keep the repo rate unchanged. This means the cost at which
commercial banks borrow from the central bank remains steady,
currently at a relatively high level.
This decision is likely to have a neutral to slightly positive effect on
the economy, depending on current conditions:
1. Inflation Management: South Africa's inflation rate has remained
near the upper limit of the SARB's 3–6% target band. By
keeping the repo rate steady, the SARB is showing its continued
focus on containing inflation without aggressively tightening
policy, which could hurt growth.
2. Economic Growth: South Africa’s economy is experiencing slow
and uneven growth, due in part to structural challenges such as
load-shedding, low investment, and high unemployment. Raising
the repo rate further could dampen growth, while cutting it might
risk inflation. Thus, holding the rate supports a delicate balance
between these two risks.
1 2025 (871621) - DUE 9 May 2025; 100% TRUSTED
Complete, trusted solutions and explanations.
(a) 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 a more neutral effect on the economy? Explain your answer. [5]
In South Africa, the South African Reserve Bank (SARB) recently
decided to keep the repo rate unchanged. This means the cost at which
commercial banks borrow from the central bank remains steady,
currently at a relatively high level.
This decision is likely to have a neutral to slightly positive effect on
the economy, depending on current conditions:
1. Inflation Management: South Africa's inflation rate has remained
near the upper limit of the SARB's 3–6% target band. By
keeping the repo rate steady, the SARB is showing its continued
focus on containing inflation without aggressively tightening
policy, which could hurt growth.
2. Economic Growth: South Africa’s economy is experiencing slow
and uneven growth, due in part to structural challenges such as
load-shedding, low investment, and high unemployment. Raising
the repo rate further could dampen growth, while cutting it might
risk inflation. Thus, holding the rate supports a delicate balance
between these two risks.
